Standard Costing and Variance Analysis

➔ Goal is to manage and control cost

Standard - Benchmark, basis, measure

Standard Cost
➔ Should be Cost
➔ Best estimate of the management what the cost should be
➔ Predetermined Cost
If Actual Cost is ↓ Lower vs. Standard Cost is ↑ Higher = Favorable F
If Actual Cost is ↑ Higher vs. Standard Cost is ↓ Lower = Unfavorable U

Variance Analysis
➔ Comparison
➔ Performance evaluation tool

Variance Formulas
Direct Materials
↑ RICE QUANTITY

Direct Labor
RATE HOURS

Overhead
Actual

Budgeted
E I

standard

-
 MATERIALS

Actual Price Actual AA 4 50 8 700

Quantity
x
=
.

,
39 100
,

Standard Price Actual 8 , 70036 540

Quantity
+
BB 4 20
:
.

-
⑳
- Standard Price Standard Quantity
:

C2 4 20.
I
8 , 25 34 68 ,
-

0
~ M ·

Material Price Variance 2 , 610 U *

If positive unfavorable
:

-
0
·

Materials Usage Variance 1 , 890 0

- -

Total Material Variance 4 50 W

,

*
Standard actual
quantity based on

produced LABOR
2 5 2 , 78
. +
Actual Rate Actual Hours 7 9
.
+

zwo 55 ,
308

7000 S2 500
+

Standard Rate Actual 7 5 .

SARD Standard 75 6875

+

standard Rate .
51 563
,

DLH/ unit 2 50
·

VOH/DLH 1 75 Labor Rate Variance (LRU) 800 U

·

2,
·
.

FOH/DLH 3 10 .

*
·

Labor Efficiency Variance 937 W

Budgeted VOH 21 875

,
Total Labor Variance 3 737
,
U

Budgeted FOH 38 , 750

AL
·DLH- 10 , 10 Actual Output = 4 500
,

11 25
· VOH-26 25 450
=

2 5
= ,
, .

FOH-38 00
·

variable Fixed

W E
*
Actual AVR +
AH
t
AFR *
AH 26 , 250
+

38 , 000 =
64 , 250 AA S S

I
BAAH
I +
Budgeted Actual SUR 10 , 08 56 , 20 BB
*
AH
*
1 75
38 78
+

BFC

i
.

B ASH
,
E
* +
Budgeted 58 , 438
+
Standard SURYSH 1 75
.
=
11 250
,
CC
W
*
Standard SURSH +
SFR+SH 1 75.
+
11 250
,
+ 3 10 - +
11 , 200 54 , 563 DB

v 1. Volume Variance 3 875

,
U
17 ,
fixed
0
VOH Variance 2188 *
volume uncontrollable
Efficiency
-

2 .

Efficiency variable
-

3 .
FOH Spending Variance 750F &

4 .

VOH Spending Variance 8 , 78

S .
Fixed Volume Variance 3 ,
875 U
~6 Variance
.

Efficiency 2 , 188 F

N 7 .

Spending Variance 8 ,
000 U

8 .

Uncontrollable Variance 3, 875U

9 .
Controllable Variance 5 812 ,
W

10 Total Overhead Variance 9 687 ,

U
 PAR,
MATERIALS

I
; -
unit 5 8 A Price Quantity 3 65 4 , 25 MPU 637 F

etgee
A
· -

.
=
+
.

~
DL- 3 his /unit #10 S Price" 5 4 250 MUV-290 U
;

A =

8 +
,

S Price S
=

5 .

8 +
4 200,
TMU-347 F

ACTULL
·
Production =

2 100
,
units LABOR

·DM -4 , 250 ft :5 .
65 A Rate A Hours =
9 75.
+
6 300 ,
61 425 LRU 1 , 575 E
,

DLH-6 300 ,
; 9 .
75/hr S x
A -
10
+

6 , 38 63 00t
,
LEV O
⑳
⑪
S S -
10
+

6 300 63 000
,
TW 1 , 575 F
,

UAL STANDARD

t
DLH -

16 000
,
DLH /unit -

3 VARIABLE FIXED

VOH-31 325 ,
- VOH/DLH -

1 8 .

Actual 31 , 325 49 500

,
80 825
,

FOH-49 500 FOH/DLH 3 25 BAAH 1 8 +

16 , 000 78 3 08 28
49
~
-

. .
800
58
, ,
,

Output Budgeted VOH 50 500 BASH 1 8 76 500

+
5 , 000 -

15 , 008
-

.
, ,

""FOH -49 50 ,
Standard 1.
8 +
15 000
,
3 25
.
x
15 , 000 75 ,
75

2, 525
: .

Spending Variance W

hie .
2 Efficiency 1 , 800 W
↑
rate 3 .

Volume 750 W

4 .
Controllable 4 325
,
W
~ .
Uncontrollable 750 W

O
6 .
Fixed Spending
Variable U
:
Spending 2 , 525
.

8 :

9 :

I .
Total 5
,
075 U
Example: (Materials produced is similar with materials used)

DM

Standard Quantity is based on MPV is used by the Purchasing Department

actual output MUV is used by the Production Department
DL