Accounting Review For Final - Standard Costing

Front 1

Two types of benchmarks ('norms') commonly used for measuring perfomance

Back 1

Cost (price ) standards; Quantity standards

benchmark is what we want to achieve

Front 2

Cost (price ) standards

Back 2

specify how much should be paid for each unit of the input (DM or DL). How much should we pay to acquire input

Front 3

Quantity standards

Back 3

specify how much of an input should be used to make a product or provide a service. how much we should be using.

Front 4

Variance

Back 4

dif between the actual results and standards. any deviations from standard (i.e. variances) that are deemed significant are bought to the attention of management for further investgation

Front 5

Price and qty variances are determined separately because

Back 5

1. different managers are usually responsible for buying and for using the inputs.
2. the buying and using activities occur at different points in time

Front 6

Unfavorable variance

Back 6

occurs when the actual exceeds the standard
(POSITIVE)

Front 7

favorable variance

Back 7

occurs when actual is less than standard
(NEGATIVE)

Front 8

DM Price variance =

Back 8

(AQ X AP) - (AQ X SP)

AQ= AQ PURCHASED - ACTUAL

difference between what was actually paid for DM and what should have been paid

Front 9

DM Qty Variance =

also, formula for SQ

Back 9

(AQ X SP) - ( SQ X SP)

AQ = actual qty of DM USED in production

difference between how much DM was used in production and what should have been used

SQ = (SQ of DM per unit X number of units produced)

Front 10

DL rate variance

Back 10

(AH X AR ) - (AH X SR)
difference bw what was actually paid to the D laborers and what should have been paid

actual cost of DL incurred (actual hrs worked x actual rate per hr)

Front 11

DL efficiency variance

SH formula

Back 11

(AH X SR ) - (SH X SR)
difference bw the amount of DL that was actually used to produce goods and how much should have been used

SH = standard hrs of DL per unit X number of units produced)

Front 12

Variable overhead (VOVH) spending variance

Back 12

Actual Variable Overhead Cost - (AH X SR)
measures the difference between what was actually spent on variable overhead and what should have been

Front 13

Variable overhead (VOVH) efficiency variance

SH =

Back 13

(AH X SR ) - (SH X SR)
measures the difference between the actual qty of the activity (DL hrs) used and how much should have been used.

does not tell if we or werent efficient. just measures if we used more/less of activity (labor hrs in this ch) than we should've had

SH = number of units produced x standard hrs of DL per unit