ACCOUNTING FUNDAMENTALS FOR MANAGERS. University of Management and Technology 1901 North Fort Myer Drive Arlington, VA 22209 Voice: (703) 516-0035 Fax: (703) 516-0985 Website: www.umtweb.edu. - PowerPoint PPT Presentation
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Requires joint efforts of accountants, engineers, and other management personnel.
Theoretical standards (ideal standards).
Currently attainable standards (normal standards).
Should be revised when they no longer reflect operating conditions they intended to measure.
Setting StandardsSetting Standards
Reviewing and Revising StandardsReviewing and Revising Standards
Types of StandardsTypes of Standards
Visit UMT online at www.umtweb.edu 51 of 72Chapter 13,
ACCT125
Explain and illustrate how standards are used in budgeting.4
Learning ObjectiveLearning Objective
Visit UMT online at www.umtweb.edu 52 of 72Chapter 13,
ACCT125
Western Rider Inc.Standard Cost per Pair of XL Jeans
$5.00 per square yard x 1.5 square yards $7.50
$9.00 per hour x .80 hours per pair 7.20
$6.00 per hour x .80 hours per pair 4.80 Total standard cost per pair $19.50
Direct Materials:
Direct Labor:
Factory Overhead:
Visit UMT online at www.umtweb.edu 53 of 72Chapter 13,
ACCT125
Western Rider Inc.Budget Performance Report
For the Month Ended June 30, 2004
Direct materials $40,150 $37,500 $2,650
Direct labor 38,500 36,000 2,500
Factory overhead 22,400 24,000 (1,600)
Total mfg. costs $101,050 $97,500 $3,550
Actual Flexible Cost Manufacturing Costs Costs Budget Variance
Visit UMT online at www.umtweb.edu 54 of 72Chapter 13,
ACCT125
Calculate and interpret the basic variances for direct materials and direct labor.5
Learning ObjectiveLearning Objective
Visit UMT online at www.umtweb.edu 55 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 Total units produced x 5,000 Total yards 7,500 Price per yard x $5.00 Total dollars $37,500
Description Standard Actual Variance
The standard is based on the actual units produced.
The standard is based on the actual units produced.
Visit UMT online at www.umtweb.edu 56 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 Total units produced x 5,000 Total yards 7,500 Price per yard x $5.00 Total dollars $37,500
Description Standard Actual Variance
$5.00$5.00
price
quantity
$37,500
7,5007,500
The total of this box is: $5.00 x 7,500 yards
The total of this box is: $5.00 x 7,500 yards
Visit UMT online at www.umtweb.edu 57 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 1.46 .04 F (quantity) Total units produced x 5,000 x 5,000Total yards 7,500 7,300 200 F (quantity)Price per yard x $5.00 x $5.50 $.50 U (price) Total dollars $37,500 $40,150 $2,650 U (total)
Description Standard Actual Variance
Actual results are:200 yards under standard$.50 per yard over standard$2,650 over standard
Actual results are:200 yards under standard$.50 per yard over standard$2,650 over standard
Visit UMT online at www.umtweb.edu 58 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 1.46 .04 F (quantity) Total units produced x 5,000 x 5,000Total yards 7,500 7,300 200 F (quantity)Price per yard x $5.00 x $5.50 $.50 U (price) Total dollars $37,500 $40,150 $2,650 U (total)
Description Standard Actual Variance
$5.50
price
quantity
$40,150
7,300
The total of this box is: $5.50 x 7,300 yards
The total of this box is: $5.50 x 7,300 yards
Actual cost.Actual cost.
Visit UMT online at www.umtweb.edu 59 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 1.46 .04 F (quantity) Total units produced x 5,000 x 5,000Total yards 7,500 7,300 200 F (quantity)Price per yard x $5.00 x $5.50 $.50 U (price)Total dollars $37,500 $40,150 $2,650 U (total)
Description Standard Actual Variance
$5.50
$5.00$5.00
price
quantity
$3,650
7,300 7,5007,500
Who is responsible for an unfavorable price variance?
Who is responsible for an unfavorable price variance?
Unfavorable price variance ($.50 x 7,300 yards)
Unfavorable price variance ($.50 x 7,300 yards)
Visit UMT online at www.umtweb.edu 60 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 1.46 .04 F (quantity) Total units produced x 5,000 x 5,000Total yards 7,500 7,300 200 F (quantity)Price per yard x $5.00 x $5.50 $.50 U (price)Total dollars $37,500 $40,150 $2,650 U (total)
Description Standard Actual Variance
$5.50
$5.00$5.00
price
quantity
$1,000
7,300 7,5007,500
Who is responsible for a favorable quantity variance?
Who is responsible for a favorable quantity variance?
Favorable quantity variance (200 yards x $5.00)
Favorable quantity variance (200 yards x $5.00)
Visit UMT online at www.umtweb.edu 61 of 72Chapter 13,
ACCT125
Direct Materials Variance ReportFor the Month Ended June 30, 2004
Square yards per unit 1.50 1.46 .04 F (quantity) Total units produced x 5,000 x 5,000Total yards 7,500 7,300 200 F (quantity)Price per yard x $5.00 x $5.50 $.50 U (price)Total dollars $37,500 $40,150 $2,650 U (total)
Description Standard Actual Variance
$5.50
$5.00$5.00
price
quantity
$3,650
$1,000
7,300 7,5007,500
Unfavorable price variance ($.50 x 7,300 yards)
Unfavorable price variance ($.50 x 7,300 yards)
Favorable quantity variance (200 yards x $5.00)
Favorable quantity variance (200 yards x $5.00)
Visit UMT online at www.umtweb.edu 62 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 Total units produced x 5,000 Total hours 4,000 Rate per hour x $9.00 Total dollars $36,000
Description Standard Actual Variance
The standard is based on the actual units produced.
The standard is based on the actual units produced.
Visit UMT online at www.umtweb.edu 63 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 Total units produced x 5,000 Total hours 4,000 Rate per hour x $9.00 Total dollars $36,000
Description Standard Actual Variance
$9.00$9.00
rates
hours
$36,000
4,0004,000
The total of this box is: $9.00 x 4,000 hours
The total of this box is: $9.00 x 4,000 hours
Visit UMT online at www.umtweb.edu 64 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 .77 .03 F (time)Total units produced x 5,000 x 5,000 Total hours 4,000 3,850 150 F (time)Rate per hour x $9.00 x $10.00 $1.00 U (rate)Total dollars $36,000 $38,500 $2,500 U (total
Description Standard Actual Variance
Actual results are:150 hours under standard$1.00 per hour over standard$2,500 over standard
Actual results are:150 hours under standard$1.00 per hour over standard$2,500 over standard
Visit UMT online at www.umtweb.edu 65 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 .77 .03 F (time)Total units produced x 5,000 x 5,000 Total hours 4,000 3,850 150 F (time)Rate per hour x $9.00 x $10.00 $1.00 U (rate)Total dollars $36,000 $38,500 $2,500 U (total
Description Standard Actual Variance
$10.00
rates
hours
$38,500
3,850
The total of this box is: $10.00 x 3,850 hours
The total of this box is: $10.00 x 3,850 hours
Actual cost.Actual cost.
Visit UMT online at www.umtweb.edu 66 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 .77 .03 F (time) Total units produced x 5,000 x 5,000Total hours 4,000 3,850 150 F (time)Rate per hour x $9.00 x $10.00 $1.00 U (rate)Total dollars $36,000 $38,500 $2,500 U (total)
Description Standard Actual Variance
$10.00
$9.00$9.00
rates
hours
$3,850
3,850 4,0004,000
Unfavorable rate variance ($1.00 x 3,850 hours)
Unfavorable rate variance ($1.00 x 3,850 hours)
Who is responsible for an unfavorable rate variance?
Who is responsible for an unfavorable rate variance?
Visit UMT online at www.umtweb.edu 67 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 .77 .03 F (time) Total units produced x 5,000 x 5,000Total hours 4,000 3,850 150 F (time)Rate per hour x $9.00 x $10.00 $1.00 U (rate)Total dollars $36,000 $38,500 $2,500 U (total)
Description Standard Actual Variance
$10.00
$9.00$9.00
rates
hours 3,850 4,0004,000
Who is responsible for a favorable time variance?
Who is responsible for a favorable time variance?
$1,350Favorable time variance (150 hours x $9.00)
Favorable time variance (150 hours x $9.00)
Visit UMT online at www.umtweb.edu 68 of 72Chapter 13,
ACCT125
Direct Labor Variance ReportFor the Month Ended June 30, 2004
Hours per unit .80 .77 .03 F (time) Total units produced x 5,000 x 5,000Total hours 4,000 3,850 150 F (time)Rate per hour x $9.00 x $10.00 $1.00 U (rate)Total dollars $36,000 $38,500 $2,500 U (total)
Description Standard Actual Variance
$10.00
$9.00$9.00
rates
hours
$3,850
$1,350
3,850 4,0004,000
Unfavorable rate variance ($1.00 x 3,850 hours)
Unfavorable rate variance ($1.00 x 3,850 hours)
Favorable time variance (150 hours x $9.00)
Favorable time variance (150 hours x $9.00)
Visit UMT online at www.umtweb.edu 69 of 72Chapter 13,
ACCT125
Explain how standards can be used for nonmanufacturing expenses.
6Learning ObjectiveLearning Objective
Visit UMT online at www.umtweb.edu 70 of 72Chapter 13,
ACCT125
Standard cost to process sales order- Actual cost to process sales order Variance
Standards for Standards for Nonmanufacturing ExpensesNonmanufacturing Expenses
Visit UMT online at www.umtweb.edu 71 of 72Chapter 13,
ACCT125
Explain and provide examples of nonfinancial performance measures.
7Learning ObjectiveLearning Objective
Visit UMT online at www.umtweb.edu 72 of 72Chapter 13,
ACCT125
Employee TrainingEmployee ExperienceNumber of new menu itemsNumber of employeesFryer reliabilityFountain supply availability
Employee TrainingEmployee ExperienceNumber of new menu itemsNumber of employeesFryer reliabilityFountain supply availability
Counter serviceCounter service Line waitPercent order accuracyFriendly service score
Line waitPercent order accuracyFriendly service score
Nonfinancial Performance Measures Nonfinancial Performance Measures of a Fast-Food Restaurantof a Fast-Food Restaurant