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Hilton 11e Chap010PPT
Hilton 11e Chap010PPT
Chapter 10
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Slide 1
H2 Slide 1 NN
Added the chapter and title as narration notes for this slide.
Helen, 6/19/2016
The font used for the narration notes are inconsistent across the chapter and across previous chapters.
Helen, 6/19/2016
Learning Objective 10-1 – Describe the
elements of a cost control system.
10-2
Managing Costs
Standard Actual
cost cost
Comparison between
standard and actual
performance
level
Cost
variance
10-3
H3
Management by Exception
Managers focus on quantities and costs
that exceed standards, a practice known as
management by exception..
Standard
Amount
Direct
Material
Direct
Labor
H3 Slide 4 NN
10-5
Setting Standards
Cost
Standards
Analysis of Task
Historical Data Analysis
10-6
Participation in Setting Standards
Accountants, engineers, personnel administrators,
and production managers combine efforts to set
standards based on experience and expectations.
10-7
Perfection versus Practical Standards:
A Behavioral Issue
Practical standards
should be set at levels
that are currently
attainable with
Should we use reasonable and
practical standards efficient effort.
or perfection
standards?
10-8
Perfection versus Practical Standards:
A Behavioral Issue
I agree. Perfection
standards are
unattainable and
therefore discouraging
to most employees.
10-9
Use of Standards by Service Organizations
10-10
Learning Objective 10-3 – Compute and interpret
the direct-material price and quantity variances and the
direct-labor rate and efficiency variances.
10-11
Cost Variance Analysis
10-12
A General Model for Variance Analysis
AQ(AP
Materials price- SP)
variance SP(AQ
Materials - SQ)
quantity variance
Labor rate variance Labor efficiency variance
AQ =Variable
Actual overhead
Quantity SP = Standard
Variable Price
overhead
AP = spending
Actual Price
variance SQ = Standard
efficiency Quantity
variance
10-13
A General Model for Variance Analysis
10-14
A General Model for Variance Analysis
10-15
Standard Costs
10-16
Zippy
Material Variances
10-19
Zippy
Material Variances
Hanson’s direct-material price variance
(MPV)
for the week was:
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
10-20
Zippy
Material Variances
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
MPV = AQ(AP - SP)
d. $800 favorable.MPV = 1,700 lbs. × ($3.90 - 4.00)
MPV = $170 Favorable
10-21
Zippy
Material Variances
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.
10-22
H4
Zippy
Material Variances
H4 Slide 23
Middle right text box: Added a period after the abbreviation 'lbs' (2Xs).
Helen, 6/19/2016
Zippy
Material Variances
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
10-24
H5
Zippy
Material Variances
a. $170 unfavorable.
MQV = SP(AQ - SQ)
MQV = $4.00(1,700 lbs. - 1,500 lbs.)
b. $170 favorable.
MQV = $800 unfavorable
c. $800 unfavorable.
d. $800 favorable.
10-25
Slide 25
H5 Slide 25
Middle right text box: Added a period after the abbreviation 'lbs' (2Xs). Slightly expanded the text box.
Helen, 6/19/2016
Material Variances Summary
Zippy
Material Variances
Actual Quantity
Used Standard Quantity
× ×
MQV = SP(AQ - SQ) Standard Price Standard Price
MQV = $4.00(1,700 lbs.
- 1,500 lbs.) 1,700 lbs. 1,500 lbs.
MQV = $800 unfavor. × ×
$4.00 per lb. $4.00 per lb.
$6,800 $6,000
Quantity variance is
unchanged because
actual and standard Quantity variance
quantities are unchanged. $800 unfavorable
10-30
Slide 30
H6 Slide 30
10-31
Standard Costs
Now let’s
calculate
standard cost
variances for
direct labor.
10-32
Zippy
Labor Variances
10-33
Zippy
Labor Variances
10-34
Zippy
Labor Variances
10-35
Zippy
Labor Variances
a. $310 unfavorable.
b. $310 favorable.
c. $300 unfavorable.
d. $300 favorable.
10-36
H7
Zippy
Labor Variances
a. $310 unfavorable.
b. $310 favorable.
LRV = AH(AR - SR)
c. $300 unfavorable.
LRV = 1,550 hrs. ($10.20 -
d. $300 favorable. $10.00)
LRV = $310 unfavorable
10-37
Slide 37
H7 Slide 37
Bottom right text box: Added a period after the abbreviation 'hrs' (1X).
Helen, 6/19/2016
Zippy
Labor Variances
a. 1,550 hours.
b. 1,500 hours.
c. 1,700 hours.
d. 1,800 hours.
10-38
Zippy
Labor Variances
a. 1,550 hours.
b. 1,500 hours.
c. 1,700 hours. SH = 1,000 units × 1.5
d. 1,800 hours. hours per unit
SH = 1,500 hours
10-39
Zippy
Labor Variances
a. $510 unfavorable.
b. $510 favorable.
c. $500 unfavorable.
d. $500 favorable.
10-40
H8
10-41
Slide 41
H8 Slide 41
Right text box: Added a period after the abbreviation 'hrs' (2Xs).
Helen, 6/19/2016
Labor Variances Summary
10-43
Significance of Cost Variances
1. Size of variance
1. Dollar amount
2. Percentage of
standard
2. Recurring variances
3. Trends
What clues help me 4. Controllability
to determine the
variances that I should
5. Favorable variances
investigate? 6. Costs and benefits of
investigation 10-44
Statistical Control Chart
Warning signals for investigation
Favorable Limit
• •
• • •
Desired Value
• •
Unfavorable Limit •
•
1 2 3 4 5 6 7 8 9
Variance Measurements
10-45
H9
10-46
Slide 46
H9 Slide 46
10-47
Controllability of Variances
Direct-Material Direct-Material
Price Variance Quantity Variance
Direct-Labor Direct-Labor
Rate Variance Efficiency Variance
10-48
Interaction among Variances
10-49
Learning Objective 10-6 – Explain how
standard costs are used in product costing.
10-50
Standard Costs and Product Costing
10-51
Learning Objective 10-7 – Summarize some
advantages of standard costing.
10-52
H10
Performance Employee
Evaluation Motivation
Advantages
Stable Product
Costs
10-53
Slide 53
H10 Slide 53 NN
No 1.: Moved the sentence starting with the word 'Standard' two spaces to the right.
Helen, 6/19/2016
Learning Objective 10-8 – Explain several
common criticisms of standard costing.
10-54
H11
Focus on cost
minimization
10-55
Slide 55
H11 Slide 55 NN
No. 7.: Moved the sentence starting with the word 'Traditional' two spaces to the right.
Helen, 6/19/2016
Learning Objective 10-9 – Prepare journal entries
to record and close out cost variances (appendix).
10-56
Use of Standard Costs
for Product Costing
Unfavorable Favorable
variance variance
10-57
Use of Standard Costs
for Product Costing
Unfavorable Favorable
variance variance
10-58
Use of Standard Costs
for Product Costing
10-59
Use of Standard Costs
for Product Costing
Unfavorable Favorable
variance variance
10-60
End Chapter 10
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.