Académique Documents
Professionnel Documents
Culture Documents
Standard Costing,
Operational
Performance
Measures, and the
Balanced Scorecard
Comparison between
standard and actual
performance
level
Cost
variance
10-3
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
10-4
Learning
Objective
2
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
• Standard cost
analysis may be used
in any organization
with repetitive tasks.
• A relationship
between tasks and
output measures
must be established.
10-10
Learning
Objective
3
10-12
A General Model for Variance
Analysis
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
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 overheadPrice
AP = spending
Actual Price
variance SQ = Standard
efficiency Quantity
variance
10-13
A General Model for Variance
Analysis
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
10-14
A General Model for Variance
Analysis
Actual Quantity Actual Quantity Standard Quantity
× × ×
Actual Price Standard Price Standard Price
10-15
Standard Costs
10-16
Material Variances Zippy
10-17
Material Variances Zippy
10-18
Material Variances Zippy
10-19
Material Variances Zippy
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
10-20
Material Variances Zippy
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
Material Variances Zippy
a. 1,700 pounds.
b. 1,500 pounds.
c. 2,550 pounds.
d. 2,000 pounds.
10-22
Material Variances Zippy
a. $170 unfavorable.
b. $170 favorable.
c. $800 unfavorable.
d. $800 favorable.
10-24
Material Variances Zippy
10-25
Material Variances Summary
10-26
Material Variances Zippy
10-27
Material Variances Zippy
10-28
Material Variances Zippy
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 = $800unfavor. × ×
$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
Isolation of Material Variances
I need the variances as soon
as possible so that I can
better identify problems Okay. I’ll start computing
and control costs. the price variance when
You accountants just don’t material is purchased and
understand the problems the quantity variance as
we production managers have. soon as material is used.
10-31
Standard Costs
10-32
Labor Variances Zippy
10-33
Labor Variances Zippy
10-34
Labor Variances Zippy
10-35
Labor Variances Zippy
a. $310 unfavorable.
b. $310 favorable.
c. $300 unfavorable.
d. $300 favorable.
10-36
Labor Variances Zippy
a. $310 unfavorable.
b. $310 favorable.
LRV = AH(AR - SR)
c. $300 unfavorable.
LRV = 1,550 hrs($10.20 - $10.00)
d. $300 favorable.
LRV = $310 unfavorable
10-37
Labor Variances Zippy
a. 1,550 hours.
b. 1,500 hours.
c. 1,700 hours.
d. 1,800 hours.
10-38
Labor Variances Zippy
a. 1,550 hours.
b. 1,500 hours.
c. 1,700 hours.
SH = 1,000 units × 1.5 hours per unit
d. SH = 1,500 hours
1,800 hours.
10-39
Labor Variances Zippy
a. $510 unfavorable.
b. $510 favorable.
c. $500 unfavorable.
d. $500 favorable.
10-40
Labor Variances Zippy
10-41
Labor Variances Summary
10-42
Learning
Objective
4
1. Size of variance
1. Dollar amount
2. Percentage of standard
2. Recurring variances
3. Trends
4. Controllability
What clues help me 5. Favorable variances
to determine the 6. Costs and benefits of
variances that I should
investigate?
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
Learning
Objective
5
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
6
Standard
Standard cost
cost variances
variances
are
are closed
closed directly
directly to
to
Cost
Cost of
of Goods
Goods Sold.
Sold.
10-51
Learning
Objective
7
Performance Employee
Evaluation Motivation
Advantages
Stable Product
Costs
10-53
Learning
Objective
8
Focus on cost
minimization
10-55
Learning
Objective
9
10-57
Operational Performance Measures in
Today’s Manufacturing Environment
Machine Performance Product Quality
● Availability ● Warranty claims
● Downtime ● Customer complaints
● Maintenance records ● Defective products
● Setup time
● Cost of rework
10-58
Operational Performance Measures in
Today’s Manufacturing Environment
Production Delivery
• Manufacturing cycle • % of on-time deliveries
time • % of orders filled
• Velocity • Delivery cycle time
• Manufacturing cycle
efficiency
10-59
Operational Performance Measures in
Today’s Manufacturing Environment
Productivity Innovation and
● Aggregate Learning
productivity ● Percentage of sales
● Partial productivity from new products
● Cost savings from
process
improvements
10-60
Learning
Objective
10
Vision
and Internal
Customer
Strategy Operations
10-62
End of Chapter 10
Let’s set the
standard a
little higher.
10-63