Professional Documents
Culture Documents
Standard Costing,
Operational
Performance
Measures, and the
Balanced Scorecard
McGraw-Hill/Irwin
Learning
Objective
1
McGraw-Hill/Irwin
Managing Costs
Standard
cost
Actual
cost
Comparison between
standard and actual
performance
level
Cost
variance
Management by Exception
Amount
Standard
Direct
Labor
Direct
Material
Learning
Objective
2
McGraw-Hill/Irwin
Setting Standards
Cost
Standards
Analysis of
Historical Data
Task
Analysis
Should we use
practical standards
or perfection
standards?
Practical standards
should be set at levels
that are currently
attainable with
reasonable and
efficient effort.
Use of Standards by
Service Organizations
Standard cost
analysis may be used
in any organization
with repetitive tasks.
A relationship
between tasks and
output measures
must be established.
Learning
Objective
3
McGraw-Hill/Irwin
Price Variance
Quantity Variance
Actual Price
Actual Quantity
Standard Price
Price Variance
Materials
price- SP)
variance
AQ(AP
Labor rate variance
AQ =Variable
Actual overhead
Quantity
AP = spending
Actual Price
variance
Standard Quantity
Standard Price
Quantity Variance
Materials
quantity
variance
SP(AQ
- SQ)
Labor efficiency variance
SP
= Standard
Price
Variable
overhead
SQ
= Standard
Quantity
efficiency
variance
Actual Price
Actual Quantity
Standard Price
Price Variance
Standard Quantity
Standard Price
Quantity Variance
Actual Price
Actual Quantity
Standard Price
Price Variance
Standard Quantity
Standard Price
Quantity Variance
Standard Costs
Material Variances
Zippy
Material Variances
Zippy
Material Variances
Zippy
Material Variances
Zippy
$170 unfavorable.
$170 favorable.
$800 unfavorable.
$800 favorable.
Material Variances
Zippy
$170 unfavorable.
$170 favorable.
$800 unfavorable.
MPV = AQ(AP - SP)
$800 favorable. MPV = 1,700 lbs. ($3.90 - 4.00)
MPV = $170 Favorable
Material Variances
Zippy
1,700 pounds.
1,500 pounds.
2,550 pounds.
2,000 pounds.
Material Variances
Zippy
SQ = 1,500 lbs
1,700 pounds.
1,500 pounds.
2,550 pounds.
2,000 pounds.
Material Variances
Zippy
$170 unfavorable.
$170 favorable.
$800 unfavorable.
$800 favorable.
Material Variances
Zippy
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
Actual Price
1,700 lbs.
Actual Quantity
Standard Price
1,700 lbs.
$6,630
Price variance
$170 favorable
$ 6,800
Standard Quantity
Standard Price
1,500 lbs.
$4.00 per
$6,000
Quantity variance
$800 unfavorable
Material Variances
Zippy
Material Variances
Zippy
Material Variances
Actual Quantity
Purchased
Actual Price
2,800 lbs.
Zippy
Actual Quantity
Purchased
2,800 lbs.
($3.90 - 4.00)
Price variance
$280 favorable
Material Variances
MQV = SP(AQ - SQ)
MQV = $4.00(1,700 lbs
- 1,500 lbs)
MQV = $800unfavor.
Actual Quantity
Used
Standard Quantity
Standard Price
Standard Price
1,700 lbs.
Quantity variance is
unchanged because
actual and standard
quantities are unchanged.
Zippy
1,500 lbs.
Quantity variance
$800 unfavorable
Standard Costs
Labor Variances
Zippy
Labor Variances
Zippy
Labor Variances
Zippy
Labor Variances
Zippy
$310 unfavorable.
$310 favorable.
$300 unfavorable.
$300 favorable.
Labor Variances
Zippy
$310 unfavorable.
$310 favorable.
LRV = AH(AR - SR)
$300 unfavorable.
LRV = 1,550 hrs($10.20 - $10.00)
$300 favorable.
LRV = $310 unfavorable
Labor Variances
Zippy
1,550 hours.
1,500 hours.
1,700 hours.
1,800 hours.
Labor Variances
Zippy
1,550 hours.
1,500 hours.
1,700 hours.
SH = 1,000 units 1.5 hours per unit
SH = 1,500 hours
1,800 hours.
Labor Variances
Zippy
$510 unfavorable.
$510 favorable.
$500 unfavorable.
$500 favorable.
Labor Variances
Zippy
b. $510 favorable.
c. $500 unfavorable.
d. $500 favorable.
Actual Rate
1,550 hours
Actual Hours
Standard Rate
1,550 hours
Rate variance
$310 unfavorable
Standard Hours
Standard Rate
1,500 hours
Efficiency variance
$500 unfavorable
Learning
Objective
4
McGraw-Hill/Irwin
2.
3.
4.
5.
6.
Recurring variances
Trends
Controllability
Favorable variances
Costs and benefits of
investigation
Desired Value
Unfavorable Limit
Variance Measurements
Learning
Objective
5
McGraw-Hill/Irwin
Controllability of Variances
Direct-Material
Price Variance
Direct-Material
Quantity Variance
Direct-Labor
Rate Variance
Direct-Labor
Efficiency Variance
Learning
Objective
6
McGraw-Hill/Irwin
Learning
Objective
7
McGraw-Hill/Irwin
Performance
Evaluation
Management by
Exception
Advantages
Stable Product
Costs
Employee
Motivation
Learning
Objective
8
McGraw-Hill/Irwin
Disadvantages
Shorter life
cycles
Not specific
Stable production
required
Narrow
definition
Focus on cost
minimization
Learning
Objective
9
McGraw-Hill/Irwin
Inventory Control
Average value
Average holding time
Ratio of inventory
value to sales
revenue
Product Quality
Warranty claims
Customer complaints
Defective products
Cost of rework
Delivery
% of on-time deliveries
% of orders filled
Delivery cycle time
Productivity
Aggregate
productivity
Partial productivity
Innovation and
Learning
Percentage of sales
from new products
Learning
Objective
10
McGraw-Hill/Irwin
Customer
Vision
and
Strategy
Internal
Operations
Learning
Objective
11
McGraw-Hill/Irwin
End of Chapter 10
Lets set the
standard a
little higher.