Standard Costing and Variance Study - Management Accounting

Explore how standard costing links planned quantities and prices of cocoa, milk, and sugar to actual usage, revealing variances and responsibility between production and purchasing.

The standard costing system applies mainly to manufacturing organizations, exemplified by PMG tissue paper production with identifiable inputs; service industries rarely use it due to non-quantifiable, personalized services.

Explore the difference between standards and budgets using Apple’s 1000 mobile phones, detailing per-unit costs for soundcard and touch-screen chips, and contrasting single-unit standards with overall budget data.

Set direct material standards by defining a bill of material, determining standard quantities from past experience, and establishing standard prices from supplier quotations for Apple mobile production.

Set direct labor standards by assigning standard hours for skilled, semi-skilled, and unskilled workers to produce each Apple mobile phone, and establish standard rates for cost variance analysis.

This lecture explains predetermination of overhead rates by analyzing variable and fixed overheads, deriving standard variable and fixed overhead rates from past data and planned activity, using the Apple example.

Examine how total cost variance charts identify material price variance and material uses variance, labour rate and efficiency variances, and overhead variances, including fixed and variable overhead costs and volumes.

Explore material price variance by comparing the standard price per unit of raw material to the actual price paid, illustrating an unfavorable variance for 15,000 chips.

Explain material price variance by comparing standard and actual chip prices, using 15,000 chips for 3,000 mobiles, and illustrate a $30,000 variance with MS Excel chart visualization.

Explain material usage variance in standard costing by comparing planned three chips per phone (nine thousand) with actual usage (fifteen thousand), highlighting unfavorable variance and responsibility between production and purchase.

Visualize material usage variance in Excel charts by comparing actual 15,000 chips to the standard 9,000 for 3,000 mobile phones, yielding a 6,000 unfavorable variance at $4 per chip.

Calculate total material cost variance by comparing standard cocoa usage and price to actual purchases, revealing 1,800 adverse price variance and 2,000 adverse usage variance.

Explains direct material cost variance using a Nestlé sugar example, comparing standard 4 kg at $7 with actual 18,000 kg at $8, yielding a $4,000 adverse variance.

Learn how to compute direct labour rate variance by comparing standard and actual hourly rates, and identify the resulting unfavorable variance.

Understand direct labor rate variance with standard costing and variance analysis. An Excel chart visualizes paying $7 instead of $5 per hour across 14,000 hours, yielding a $28,000 unfavorable variance.

Calculate total standard hours by multiplying each product's quantity by its standard hours per unit; for 1,000 iPads, 2,000 iPods, and 3,000 iPhones, this equals 13,000 standard hours.

Explains labour efficiency variance by comparing standard hours to actual hours and multiplying the hour difference by the standard labour rate, using the Apple example for 5,000 phones.

Explore direct labour efficiency variance in standard costing by comparing actual hours to standard hours and calculating a 1000 hour saving, equating to a 5000 favorable variance.

Compute total direct labour cost variance by comparing standard cost of 15,000 hours at $5 to actual cost of 14,000 hours at $7, revealing a $23,000 adverse variance.

illustrates how to compute variable overhead expenditure variance using a standard rate of $10 per hour and an actual rate of $6 over 3,000 hours, yielding a $12,000 favorable variance.

Illustrate how a lower variable overhead expenditure rate creates a favorable variance by saving four dollars per machine hour over 3,000 hours, totaling twelve thousand dollars.

Examine variable overhead efficiency variance through a practical example: standard 4 hours per phone, 1000 units; actual 3000 hours; rate drops from 10 to 6 dollars, yielding a favorable variance.

explore variable overhead efficiency variance by comparing standard versus actual hours, quantify hours saved at the standard rate per hour, and identify a favorable variance.

Analyze total variable overhead cost variance by comparing standard costs for one thousand mobile phones against actual overhead, using electricity rates of $10 and $6, revealing a $22,000 favorable variance.

Learn how to compute total variable overhead cost variance using the direct method by adding variable overhead expenditure variance and variable overhead efficiency variance.

Explain material, labour, and variable overhead variance formulas, showing standard minus actual multiplied by standard rate, including rate, price, and efficiency variances for cost control.

Explore fixed overhead volume variance through a case where planned production is 10,000 units, actual output is 9,000, leading to under recovered fixed overhead of 5,000 and adverse volume variance.

Explore fixed overhead volume variance by contrasting budgeted rent of $50,000 for 10,000 units with actual output of 11,000, yielding $55,000 absorbed fixed overhead and a $5,000 favorable variance.

Apply fixed overhead volume variance formulas by linking budgeted fixed overhead to recovered fixed overhead from actual production, using recovery rate per unit and actual production units.

Explain how fixed overhead is recovered per unit using the recovery rate and analyze plan versus actual production through fixed overhead volume variance.

Explore an alternative method to calculate fixed overhead volume variance by comparing planned and actual units with the recovery rate per unit, highlighting favorable and unfavorable outcomes.

Demonstrate the alternative method for fixed overhead volume variance, detailing underproduction of 1,000 units and a $5,000 under-recovery at $5 per unit.

Explore the fixed overhead expenditure variance by comparing budgeted fixed overhead of 50,000 with actual fixed overhead of 43,000, highlighting a favorable 7,000 variance.

Learn how to visualize fixed overhead expenditure variance using Excel charts, comparing budgeted fixed overhead of 50,000 with actual 43,000 to reveal a 7,000 favorable variance.

Learn how total fixed overhead cost variance equals the sum of expenditure and volume variances, illustrated with a case where planned overhead is 50,000 and 9,000 units are produced.

Explore advanced variances in standard costing, including material mix and yield, labour mix and efficiency, variable overhead efficiency and expenditure variances, and fixed overhead volume, efficiency, capacity, calendar variances.

Explains calculating labour variances in an Apple mobile production case, detailing labour efficiency variance, labour rate variance, and total labour cost variance across skilled, unskilled, and trainee workers.

Examine material mix variance by allocating the actual total materials (cocoa, sugar, milk) into the standard 2:1:2 ratio to obtain revised actual quantity, then price differences to compute variance.

Analyze material mix variance by comparing actual usage to revised actual quantities distributed in the standard 2:1:2 mix, and compute the cocoa, sugar, and milk variances totaling 620 adverse.

Learn material yield variance by computing the difference between total standard and revised actual quantity, multiplied by the standard price, with examples using cocoa, sugar, and milk.

Calculate material yield variance by comparing revised quantities for cocoa powder, sugar, and milk in chocolate production. See how higher inputs with the same output yield an adverse variance.

Reconcile material variances by splitting material cost variance into price variance, and uses variance, with uses split into mix and yield variances, confirming a final material cost variance of 22,600.

Explore labour mix variance and compute labour efficiency, rate, and total cost variances using a case on Apple mobile production, detailing skilled, unskilled, and trainee labour hours and rates.

Explore labour mix variance in standard costing and variance study by comparing revised actual hours across skilled, unskilled, and trainees to standard hours, calculating favorable and adverse variances.

Compute labour mix variance by distributing total hours in the 10:20:30 ratio among skilled, unskilled, and trainees, compare revised actual hours to actual hours, and assess favorable or unfavorable variances using standard rates.

The lecture explains labour yield variance, also known as efficiency variance, computed from standard hours minus revised actual hours at the standard rate, with examples for skilled, unskilled, and trainees.

Calculate labour yield variance by comparing total standard hours with revised actual hours for 2000 mobile phones. Show skilled, unskilled, and training variances and the adverse labour yield variance.

Reconcile standard costing variances by splitting the total labour cost variance into labour efficiency variance and labour rate variance, with labour mix variance and labour sub efficiency variance.

Compute fixed overhead efficiency variance by comparing 18,000 standard hours for actual output with 21,000 actual hours, using a 2.5 per hour recovery rate.

Learn how fixed overhead calendar variance measures cost impact of fewer planned working days, using Apple with 25 planned days and 20 actual days, resulting in a 10,000 adverse variance.

Compute fixed overhead capacity variance and its calendar variance using a case where actual hours exceed planned hours, illustrating recovery rate, calendar days, and the link to budgeted capacity.