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CHAPTER 10STANDARD COSTING

SHORT ANSWER/PROBLEMS

1. List and discuss briefl t!e t!ree standards "f attainabilit.

ANS#ER$ E%&ected standards reflect '!at is actuall e%&ected t" "ccur in t!e future &eri"d. T!is standard ta(es int" c"nsiderati"n 'aste and inefficiencies and )a(esall"'ances f"r t!e).

Practical standards can be reac!ed "r e%ceeded )"st "f t!e ti)e 'it! reas"nable eff"rt.T!is standard all"'s f"r n"r)al* una+"idable ti)e &r"ble)s "r delas.

Ideal standards &r"+ide f"r n" inefficiencies "f an t&e. T!is standard d"es n"t all"' f"rn"r)al "&eratin, delas "r !u)an li)itati"ns.

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/. Discuss briefl t!e t&e "f inf"r)ati"n c"ntained "n a a bill "f )aterials and b an"&erati"ns fl"' d"cu)ent.

ANS#ER$ a A bill "f )aterials c"ntains t!e identificati"n "f c")&"nents* adescri&ti"n "f c")&"nents* and t!e 2uantit "f eac! )aterial re2uired f"r a &r"duct. bAn "&erati"ns fl"' d"cu)ent c"ntains an identificati"n nu)ber* descri&ti"ns "f t!e tas(st" be &erf"r)ed* t!e de&art)ents d"in, t!e '"r(* and standard nu)ber "f !"urs and3"r)inutes t" &erf"r) eac! tas(.

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4. Define t!e f"ll"'in, ter)s$ standard c"st sste)* t"tal +ariance* )aterial &rice +ariance*and lab"r efficienc +ariance.

ANS#ER$ A standard c"st sste) rec"rds b"t! standard c"sts and actual c"sts in t!eacc"untin, rec"rds. T!is &r"cess all"'s f"r better c"st c"ntr"l because actual c"sts can beeasil c")&ared t" standard c"sts.

A t"tal +ariance is t!e difference bet'een actual in&ut c"st f"r )aterial "r lab"r and t!estandard c"st f"r )aterial "r lab"r f"r t!e "ut&ut &r"duced.

T!e )aterial &rice +ariance is t!e difference bet'een t!e actual &rice &aid f"r )aterial andt!e standard &rice "f t!e )aterial ti)es t!e actual 2uantit used "r &urc!ased.

T!e lab"r efficienc +ariance c")&ares t!e nu)ber "f !"urs actuall '"r(ed 'it! t!estandard !"urs all"'ed f"r t!e &r"ducti"n ac!ie+ed and +alues t!is difference at t!estandard lab"r rate.

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5. Discuss !"' establis!in, standards benefits t!e f"ll"'in, )ana,e)ent functi"ns$ &erf"r)ance e+aluati"n and decisi"n )a(in,.

ANS#ER$ Perf"r)ance e+aluati"n is en!anced b t!e use "f standard c"sts because itall"'s )ana,e)ent t" &in&"int de+iati"ns fr") standard c"sts and &"ints "ut +ariances.T!e +ariances are anal6ed and indi+idual res&"nsibilit can be assessed f"r t!e +ariances*de&endin, "n t!e nature "f t!e causes.

T!e a+ailabilit "f standard c"st inf"r)ati"n facilitates )an decisi"ns. T!ese c"sts can be

used in bud,etin,* c"st esti)ates f"r 7"bs* and deter)inin, c"ntributi"ns )ade b +ari"us &r"duct lines8 and* t!us* can be used t" decide '!et!er t" add ne' lines "r dr"& "ld lines.

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9. Discuss '! standards )a need t" be c!an,ed after t!e !a+e been in effect f"r s")e &eri"d "f ti)e.

ANS#ER$ Standards )a need t" be c!an,ed fr") ti)e t" ti)e because "f c!an,in,ec"n")ic c"nditi"ns* a+ailabilit "f )aterials* 2ualit "f )aterials* and lab"r rates "r s(illle+els. Standards s!"uld be re+ie'ed &eri"dicall t" assure )ana,e)ent t!at currentstandards are bein, establis!ed and used.

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@. Pr"+ide t!e c"rrect ter) f"r eac! "f t!e f"ll"'in, definiti"ns$

a. a c"st t!at fluctuates 'it! lar,e c!an,es in le+el "f acti+it b. a ran,e "f acti+it "+er '!ic! c"sts be!a+e as &redictedc. t!e ca&acit le+el at '!ic! a fir) belie+es it 'ill "&erate at durin, t!e c")in,

 &r"ducti"n ccled. t!e difference bet'een actual +ariable "+er!ead and bud,eted +ariable "+er!ead

 based "n in&utse. t!e difference bet'een t"tal actual "+er!ead and t"tal a&&lied "+er!eadf. t!e difference bet'een t"tal bud,eted "+er!ead based "n in&uts and a&&lied

"+er!ead,. t!e difference bet'een t"tal actual "+er!ead and t"tal bud,eted "+er!ead based "n

"ut&ut!. t!e difference bet'een actual fi%ed "+er!ead and bud,eted fi%ed "+er!ead

ANS#ERS$a. ste& fi%ed c"st e. t"tal "+er!ead +ariance

 b. rele+ant ran,e f. +"lu)e +ariancec. e%&ected annual ca&acit ,. efficienc +arianced. +ariable "+er!ead !. fi%ed "+er!ead

  s&endin, +ariance s&endin, +ariance

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se t!e f"ll"'in, inf"r)ati"n f"r 2uesti"ns 10 and 11.

AC C")&an !as t!e f"ll"'in, inf"r)ati"n a+ailable f"r t!e current ear$

  Standard:-aterial 4.9 feet &er unit B /.:0 &er f""tLab"r 9 direct lab"r !"urs B >.90 &er unit

  Actual:

-aterial @9*:/9 feet used 100*000 feet &urc!ased B /.90 &er f""tLab"r 1//*500 direct lab"r !"urs incurred &er unit B >.49 &er !"ur  

/9*900 units 'ere &r"duced 10. C")&ute t!e )aterial &urc!ase &rice and 2uantit +ariances.

ANS#ER$ -aterial &rice +ariance$100*000 /.90 /90*000

100*000 /.:0 /:0*000 10*000 =

  -aterial 2uantit +ariance$@9*:/9 /.:0 /5>*:/9>@*/90 /.:0 /4/*090

1:*9<9

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11. C")&ute t!e lab"r rate and efficienc +ariances.

ANS#ER$ Lab"r rate +ariance$1//*500 >.49 1*0//*0501//*500 >.90 1*050*500

1>*4:0 =

Lab"r efficienc +ariance$1//*500 >.90 1*050*5001/<*900 >.90 1*0>4*<90

54*490 =

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se t!e f"ll"'in, inf"r)ati"n f"r 2uesti"ns 1/F15.

OP C". a&&lies "+er!ead based "n direct lab"r !"urs and !as t!e f"ll"'in, a+ailable f"r N"+e)ber$

Standard:Direct lab"r !"urs &er unit 9;ariable "+er!ead &er DLH .<9=i%ed "+er!ead &er DLH based "n >*@00 DLHs 1.@0

Actual:nits &r"duced 1*>00Direct lab"r !"urs >*@00;ariable "+er!ead :*500=i%ed "+er!ead 1<*900

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1/. C")&ute all t!e a&&r"&riate +ariances usin, t!e t'"+ariance a&&r"ac!.

ANS#ER$Actual :*500 1<*900 /4*@00

Budget Variance: $24 !=OH >*@00 1.@0 1:*@10;OH 1*>00 9 .<9 :*<90 /4*::0

V"lu#e Variance: $% &A&&lied OH$

1*>00 9 /.:9 /4*>90

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14. C")&ute all t!e a&&r"&riate +ariances usin, t!e t!ree+ariance a&&r"ac!.

ANS#ER$Actual /4*@00

  S'ending Variance: $() !=le%ible ud,et ased "n Actual In&ut=OH 1:*@10;OH >*@00 .<9 :*:<9 /4*9>9

  E**icienc+ Variance: $,) &

=le%ible ud,et ased "n Standard DLHs=OH 1:*@10;OH 1*>00 9 .<9 :*<90 /4*::0

V"lu#e Variance: $% &A&&lied OH$1*>00 9 /.:9 /4*>90

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 15. C")&ute all t!e a&&r"&riate +ariances usin, t!e f"ur+ariance a&&r"ac!.

ANS#ER$Actual ;OH :*500

Varia-le S'ending Variance: $2,) &=le%. ud. ased "n ActualIn&ut H"urs >*@00 .<9 :*:<9

Varia-le E**icienc+ Variance: $,) &A&&lied ;OH 1*>00 9 .<9 :*<90

Actual =OH 1<*900&OH S'ending Variance: $)% !

DGETED =OH1:*@10&OH V"lu#e Variance: $% &

A&&lied =OH 1*>00 9 1.@0 1<*100

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19. T!e Ha'aii C". !as )ade t!e f"ll"'in, inf"r)ati"n a+ailable f"r its &r"ducti"n facilit f"r une /001. =i%ed "+er!ead 'as esti)ated at 1@*000 )ac!ine !"urs f"r t!e &r"ducti"nccle. Actual )ac!ine !"urs f"r t!e &eri"d 'ere 1>*@00* '!ic! ,enerated 4*@00 units.

-aterial &urc!ased >0*000 &ieces 415*000-aterial 2uantit +ariance :*500 -ac!ine !"urs used 1>*@00 !"urs;OH s&endin, +ariance 90 Actual fi%ed "+er!ead :0*000Actual lab"r c"st 50*1/0Actual lab"r !"urs 9*@00

Ha'aiiJs standard c"sts are as f"ll"'s$

Direct )aterial /0 &ieces B 5 &er &ieceDirect lab"r 1.9 !"urs B : &er !"ur  ;ariable "+er!ead

a&&lied "n a )ac!ine !"ur basis 5.> !"urs B /.90 &er !"ur =i%ed "+er!ead

a&&lied "n a )ac!ine !"ur basis 5.> !"urs B 4 &er !"ur 

Deter)ine t!e f"ll"'in, ite)s$a. )aterial &urc!ase &rice +ariance b. standard 2uantit all"'ed f"r )aterialc. t"tal standard c"st "f )aterial all"'edd. actual 2uantit "f )aterial usede. lab"r rate +ariancef. standard !"urs all"'ed f"r lab"r 

,. t"tal standard c"st "f lab"r all"'ed!. lab"r efficienc +ariancei. actual +ariable "+er!ead incurred 7. standard )ac!ine !"urs all"'ed(. +ariable "+er!ead efficienc +ariancel. bud,eted fi%ed "+er!ead). a&&lied fi%ed "+er!eadn. fi%ed "+er!ead s&endin, +ariance". +"lu)e +ariance &. t"tal "+er!ead +ariance

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ANS#ER$a. actual )aterial c"st 415*000

actual &ieces at standard c"st >0*000 5 4/0*000)aterial &urc!ase &rice +ariance :*000 =

 b. 4*@00 units /0 &ieces &er unit <>*000 standard 2uantit all"'ed

c. t"tal standard c"st "f )aterial <>*000 5 41/*000

d. standard c"st "f actual )aterial used41/*000 :*500 2uantit +ariance 41>*50041>*500 ÷ 5 <@*:00 actual &ieces used

e. actual lab"r c"st 50*1/09*@00 actual DLHs : 49*500lab"r rate +ariance 5*</0

f. 4*@00 units 1.9 standard !"urs &er unit 9*>90 SHA

,. 9*>90 SHA : 49*100

!. actual !"urs standard rate fr") e 49*500standard c"st "f lab"r all"'ed fr") , 49*100lab"r efficienc +ariance 400

i. actual )ac!ine !"urs standard ;OH rate 1>*@00 /.90 5<*/90;OH s&endin, +ariance 90 actual ;OH 5<*400

 7. 4*@00 units 5.> standard !"urs &er unit 1>*</0 -H all"'ed

(. standard !"urs all"'ed fr") 7 standard ;OH rate

1>*</0 /.90 5:*>00actual )ac!ine !"urs standard rate fr") i1>*@00 /.90 5<*/90

+ariable "+er!ead efficienc +ariance 590

l. 1@*000 )ac!ine !"urs 4 9<*000

). 4*@00 units 5.> !"urs &er unit 4.00 9:*1:0

n. actual fi%ed "+er!ead :0*000 bud,eted fi%ed "+er!ead fr") l 9<*000fi%ed "+er!ead s&endin, +ariance 4*000

". bud,eted fi%ed "+er!ead fr") l 9<*000a&&lied fi%ed "+er!ead fr") ) 9:*1:0+"lu)e +ariance >50

 &. t"tal actual "+er!ead 10<*400K:0*000 5<*400 fr") i

t"tal a&&lied "+er!ead 1>*</0 SHA 9.90 10/*@:0T"tal "+er!ead +ariance 5*450

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