chap011 standardcosting (1)

8/11/2019 chap011 StandardCosting (1)

1/109

Standard Costs and Operating

Performance Measures


2/109

Standard Costs

Standards are benchmarks or norms formeasuring performance. In managerial accounting,

two types of standards are commonly used.

Quantity standardsspecify how much of aninput should be used to

make a product or

provide a service.

Price standardsspecify how muchshould be paid for

each unit of the

input.

Examples: Firestone, Sears, McDonalds, hospitals,

construction and manufacturing companies.


3/109

Standard Costs

DirectMaterial

Deviations from standards deemed significantare brought to the attention of management, apractice known as management by exception.

Type of Product Cost

Amount

DirectLabor ManufacturingOverhead

Standard


4/109

Variance Analysis Cycle

Prepare standardcost performance

report

Analyzevariances

Begin

Identifyquestions

Receiveexplanations

Takecorrective

actions

Conduct nextperiods

operations


5/109

Accountants, engineers, purchasingagents, and production managers

combine efforts to set standards that encourage

efficient future operations.

Setting Standard Costs


6/109

Setting Standard Costs

Should we useideal standardsthatrequire employees towork at 100 percent

peak efficiency?

Engineer Managerial Accountant

I recommend using practicalstandardsthat are currentlyattainable with reasonable

and efficient effort.


7/109

Learning Objective 1

Explain how directmaterials standards and

direct laborstandards are set.


8/109


9/109

Setting Standards

Six Sigma advocates have sought toeliminate all defects and waste, rather than

continually build them into standards.

As a result allowances for waste andspoilage that are built into standards

should be reduced over time.


10/109

Setting Direct Labor Standards

RateStandards

Often a singlerate is used that reflectsthe mix of wages earned.

TimeStandards

Use time andmotion studies for

each labor operation.


11/109

Setting Variable Manufacturing OverheadStandards

RateStandards

The rate is thevariable portion of the

predetermined overhead

rate.

QuantityStandards

The quantity isthe activity in the

allocation base for

predetermined overhead.


12/109

Standard Cost CardVariable ProductionCost

A standard cost card for one unit ofproduct might look like this:

A A x BStandard Standard Standard

Quantity Price Cost

Inputs or Hours or Rate per Unit

Direct materials 3.0 lbs. 4.00$ per lb. 12.00$

Direct labor 2.5 hours 14.00 per hour 35.00

Variable mfg. overhead 2.5 hours 3.00 per hour 7.50

Total standard unit cost 54.50$

B


13/109

Price and Quantity Standards

Price and quantity standards aredetermined separately for two reasons:

The purchasing manager is responsible for rawmaterial purchase prices and the production manageris responsible for the quantity of raw material used.

The buying and using activities occur at different times.Raw material purchases may be held in inventory for aperiod of time before being used in production.


14/109

A General Model for Variance Analysis

Variance Analysis

Price Variance

Difference betweenactual price andstandard price

Quantity Variance

Difference betweenactual quantity andstandard quantity


15/109

Variance Analysis

Materials price varianceLabor rate varianceVOH rate variance

Materials quantity varianceLabor efficiency varianceVOH efficiency variance


Price Variance Quantity Variance


16/109


Actual Quantity Actual Quantity Standard Quantity

Actual Price Standard Price Standard Price



17/109





Actual quantity is the amount of directmaterials, direct labor, and variable

manufacturing overhead actually used.


18/109





Standard quantity is the standard quantityallowed for the actual output of the period.


19/109


20/109


Standard priceis the amount that shouldhave been paid for the input used.





21/109


(AQ AP)(AQ SP) (AQ SP)(SQ SP)

AQ = Actual Quantity SP = Standard PriceAP = Actual Price SQ = Standard Quantity





22/109


Compute the directmaterials price and

quantity variances and

explain their significance.


23/109

Glacier Peak Outfitters has the following directmaterial standard for the fiberfill in its mountain

parka.

0.1 kg. of fiberfill per parka at $5.00 per kg.

Last month 210 kgs. of fiberfill were purchased and

used to make 2,000 parkas. The material cost atotal of $1,029.

Material VariancesAn Example


24/109

210 kgs. 210 kgs. 200 kgs.

$4.90 per kg. $5.00 per kg. $5.00 per kg.

= $1,029 = $1,050 = $1,000

Price variance$21 favorable

Quantity variance$50 unfavorable



Material Variances Summary


25/109

210 kgs. 210 kgs. 200 kgs.


= $1,029 = $1,050 = $1,000





$1,029 210 kgs= $4.90 per kg



26/109

210 kgs. 210 kgs. 200 kgs.


= $1,029 = $1,050 = $1,000





0.1 kg per parka 2,000 parkas= 200 kgs



27/109

Material Variances:Using the Factored Equations

Materials price varianceMPV = AQ (AP - SP)

= 210 kgs ($4.90/kg - $5.00/kg)

= 210 kgs (-$0.10/kg)

= $21 F

Materials quantity variance

MQV = SP (AQ - SQ)

= $5.00/kg (210 kgs-(0.1 kg/parka 2,000 parkas))

= $5.00/kg (210 kgs - 200 kgs)

= $5.00/kg (10 kgs)

= $50 U


28/109

Isolation of Material Variances

I need the price variancesooner so that I can betteridentify purchasing problems.

You accountants just dontunderstand the problems that

purchasing managershave.

Ill start computingthe price variancewhen material is

purchased ratherthan when its used.


29/109

Material Variances

Hanson purchased andused 1,700 pounds.

How are the variancescomputed if the amountpurchaseddiffers from

the amount used?

The price variance iscomputed on the entire

quantitypurchased.

The quantity varianceis computed only on

the quantityused.


30/109

Materials Price VarianceMaterials Quantity Variance

Production Manager Purchasing Manager

The standard price is used to compute the quantity varianceso that the production manager is not held responsible for

the purchasing managers performance.

Responsibility for Material Variances


31/109

I am not responsible forthis unfavorable material

quantity variance.

You purchased cheapmaterial, so my peoplehad to use more of it.

Your poor schedulingsometimes requires me to

rush order material at ahigher price, causing

unfavorable price variances.

Responsibility for Material Variances


32/109

Hanson Inc. has the following direct materialstandard to manufacture one Zippy:

1.5 pounds per Zippy at $4.00 per pound

Last week, 1,700 pounds of material werepurchased and used to make 1,000 Zippies. The

material cost a total of $6,630.

ZippyQuick Check


33/109

Quick Check Zippy

Hansons material price variance (MPV)for the week was:

a. $170 unfavorable.b. $170 favorable.

c. $800 unfavorable.

d. $800 favorable.


34/109

Hansons material price variance (MPV)for the week was:



d. $800 favorable.MPV = AQ(AP - SP)MPV = 1,700 lbs. ($3.90 - 4.00)MPV = $170 Favorable

Quick Check Zippy


35/109

Quick Check

Hansons material quantity variance (MQV)for the week was:

a. $170 unfavorable.

b. $170 favorable.


d. $800 favorable.

Zippy


36/109

Hansons material quantity variance (MQV)for the week was:


b. $170 favorable.


d. $800 favorable.MQV = SP(AQ - SQ)MQV = $4.00(1,700 lbs - 1,500 lbs)MQV = $800 unfavorable

Quick Check Zippy


37/109

1,700 lbs. 1,700 lbs. 1,500 lbs.

$3.90 per lb. $4.00 per lb. $4.00 per lb.

= $6,630 = $ 6,800 = $6,000





ZippyQuick Check


38/109

Hanson Inc. has the following material standard tomanufacture one Zippy:

1.5 pounds per Zippy at $4.00 per pound

Last week, 2,800 poundsof material werepurchased at a total cost of $10,920, and 1,700

pounds were used to make 1,000 Zippies.

ZippyQuick Check Continued


39/109

Actual Quantity Actual QuantityPurchased Purchased

Actual Price Standard Price

2,800 lbs. 2,800 lbs.

$3.90 per lb. $4.00 per lb.

= $10,920 = $11,200


Price variance increasesbecause quantity

purchased increases.



40/109

Actual QuantityUsed Standard Quantity

Standard Price Standard Price

1,700 lbs. 1,500 lbs.

$4.00 per lb. $4.00 per lb.

= $6,800 = $6,000


Quantity variance isunchanged becauseactual and standard

quantities are unchanged.



41/109


Compute the direct laborrate and efficiency

variances and explain

their significance.


42/109

Glacier Peak Outfitters has the following direct laborstandard for its mountain parka.

1.2 standard hours per parka at $10.00 per hour

Last month, employees actually worked 2,500 hoursat a total labor cost of $26,250 to make 2,000

parkas.

Labor VariancesAn Example


43/109

Rate variance$1,250 unfavorable

Efficiency variance$1,000 unfavorable

Actual Hours Actual Hours Standard Hours

Actual Rate Standard Rate Standard Rate

Labor Variances Summary

2,500 hours 2,500 hours 2,400 hours

$10.50 per hour $10.00 per hour. $10.00 per hour

= $26,250 = $25,000 = $24,000


44/109




= $26,250 = $25,000 = $24,000



$26,250 2,500 hours= $10.50 per hour




45/109




= $26,250 = $25,000 = $24,000



1.2 hours per parka 2,000parkas = 2,400 hours



L b V i


46/109

Labor Variances:Using the Factored Equations

Labor rate varianceLRV = AH (AR - SR)

= 2,500 hours ($10.50 per hour$10.00 per hour)

= 2,500 hours ($0.50 per hour)

= $1,250 unfavorable

Labor efficiency variance

LEV = SR (AH - SH)

= $10.00 per hour (2,500 hours2,400 hours)

= $10.00 per hour (100 hours)

= $1,000 unfavorable


47/109

Responsibility for Labor Variances

Production Manager

Production managers areusually held accountable

for labor variancesbecause they can

influence the:

Mix of skill levelsassigned to work tasks.

Level of employeemotivation.

Quality of productionsupervision.

Quality of trainingprovided to employees.


48/109

I am not responsible forthe unfavorable laborefficiency variance!

You purchased cheapmaterial, so it took more

time to process it.

I think it took more timeto process thematerials because the

MaintenanceDepartment has poorly

maintained yourequipment.

Responsibility for Labor Variances


49/109

Hanson Inc. has the following direct laborstandard to manufacture one Zippy:

1.5 standard hours per Zippy at$12.00 per direct labor hour

Last week, 1,550 direct labor hours were

worked at a total labor cost of $18,910to make 1,000 Zippies.

ZippyQuick Check


50/109

Hansons labor rate variance (LRV) for theweek was:


b. $310 favorable.


d. $300 favorable.

Quick Check Zippy


51/109

Hansons labor rate variance (LRV) for theweek was:


b. $310 favorable.


d. $300 favorable.

Quick Check

LRV = AH(AR - SR)

LRV = 1,550 hrs($12.20 - $12.00)LRV = $310 unfavorable

Zippy


52/109

Hansons labor efficiency variance (LEV)for the week was:



d. $600 favorable.

Quick Check Zippy


53/109

Hansons labor efficiency variance (LEV)for the week was:



d. $600 favorable.

Quick Check

LEV = SR(AH - SH)LEV = $12.00(1,550 hrs - 1,500 hrs)LEV = $600 unfavorable

Zippy


54/109



Rate variance$310 unfavorable

Efficiency variance$600 unfavorable


$12.20 per hour $12.00 per hour $12.00 per hour

= $18,910 = $18,600 = $18,000

ZippyQuick Check


55/109


Compute the variablemanufacturing overhead

rate and efficiency

variances.

Variable Manufacturing Overhead Variances


56/109

Glacier Peak Outfitters has the following direct variablemanufacturing overhead labor standard for its mountain

parka.

1.2 standard hours per parka at $4.00 per hour

Last month, employees actually worked 2,500 hours tomake 2,000 parkas. Actual variable manufacturing

overhead for the month was $10,500.

Variable Manufacturing Overhead VariancesAn Example



57/109



= $10,500 = $10,000 = $9,600



Actual Hours Actual Hours Standard Hours Actual Rate Standard Rate Standard Rate

Variable Manufacturing Overhead VariancesSummary



58/109




= $10,500 = $10,000 = $9,600



$10,500 2,500 hours= $4.20 per hour




59/109




= $10,500 = $10,000 = $9,600



1.2 hours per parka

2,000parkas = 2,400 hours


Variable Manufacturing Overhead Variances:


60/109

Variable Manufacturing Overhead Variances:Using Factored Equations

Variable manufacturing overhead rate varianceVMRV = AH (AR - SR)

= 2,500 hours ($4.20 per hour$4.00 per hour)

= 2,500 hours ($0.20 per hour)

= $500 unfavorable

Variable manufacturing overhead efficiency variance

VMEV = SR (AH - SH)

= $4.00 per hour (2,500 hours2,400 hours)

= $4.00 per hour (100 hours)

= $400 unfavorable


61/109

Hanson Inc. has the following variablemanufacturing overhead standard to

manufacture one Zippy:

1.5 standard hours per Zippy at$3.00 per direct labor hour

Last week, 1,550 hours were worked to make

1,000 Zippies, and $5,115 was spent forvariable manufacturing overhead.

ZippyQuick Check


62/109

Hansons rate variance (VMRV) for variablemanufacturing overhead for the week was:



d. $300 favorable.

Quick Check Zippy


63/109

Hansons rate variance (VMRV) for variablemanufacturing overhead for the week was:



d. $300 favorable.

Quick Check

VMRV = AH(AR - SR)VMRV = 1,550 hrs($3.30 - $3.00)

VMRV = $465 unfavorable

Zippy


64/109

Hansons efficiency variance (VMEV) forvariable manufacturing overhead for the weekwas:


b. $435 favorable.


d. $150 favorable.

Quick Check Zippy


65/109

Hansons efficiency variance (VMEV) forvariable manufacturing overhead for the weekwas:


b. $435 favorable.


d. $150 favorable.

Quick Check

VMEV = SR(AH - SH)VMEV = $3.00(1,550 hrs - 1,500 hrs)VMEV = $150 unfavorable

1,000 units 1.5 hrs per unit

Zippy


66/109





= $5,115 = $4,650 = $4,500



ZippyQuick Check

Variance Analysis and Management by


67/109

Variance Analysis and Management byException

How do I knowwhich variances to

investigate?

Larger variances, in

dollar amount or asa percentage of the

standard, areinvestigated first.


68/109

A Statistical Control Chart

1 2 3 4 5 6 7 8 9

Variance Measurements

Favorable Limit

Unfavorable Limit

Warning signals for investigation

Desired Value


69/109

Advantages of Standard Costs

Management byexception

Advantages

Promotes economyand efficiency

Simplifiedbookkeeping

Enhancesresponsibility

accounting


70/109

PotentialProblems

Emphasis onnegative may

impact morale.

Emphasizing standardsmay exclude otherimportant objectives.

Favorablevariances may

be misinterpreted.

Continuousimprovement maybe more important

than meeting standards.

Standard costreports may

not be timely.

Invalid assumptionsabout the relationship

between laborcost and output.

Potential Problems with Standard Costs


71/109


Compute delivery cycletime, throughput time, and

manufacturing cycle

efficiency (MCE).


72/109

Process time is the only value-added time.

Delivery Performance Measures

Wait Time

Process Time + Inspection Time

+ Move Time + Queue Time

Delivery Cycle Time

OrderReceived

ProductionStarted

GoodsShipped

Throughput Time


73/109

ManufacturingCycle

Efficiency

Value-added time

Manufacturing cycle time=

Wait Time

Process Time + Inspection Time

+ Move Time + Queue Time

Delivery Cycle Time

OrderReceived

ProductionStarted

GoodsShipped

Throughput Time

Delivery Performance Measures


74/109

Quick Check

A TQM team at Narton Corp has recorded thefollowing average times for production:

Wait 3.0 days Move 0.5 days

Inspection 0.4 days Queue 9.3 days

Process 0.2 days

What is the throughput time?

a. 10.4 days.

b. 0.2 days.

c. 4.1 days.

d. 13.4 days.


75/109




Process 0.2 days

What is the throughput time?

a. 10.4 days.

b. 0.2 days.

c. 4.1 days.

d. 13.4 days.

Quick Check

Throughput time = Process + Inspection + Move + Queue= 0.2 days + 0.4 days + 0.5 days + 9.3 days= 10.4 days


76/109

Quick Check



Inspection 0.4 days Queue 9.3 daysProcess 0.2 days

What is the Manufacturing Cycle Efficiency (MCE)?

a. 50.0%.

b. 1.9%.

c. 52.0%.

d. 5.1%.


77/109



Inspection 0.4 days Queue 9.3 daysProcess 0.2 days

What is the Manufacturing Cycle Efficiency (MCE)?

a. 50.0%.

b. 1.9%.

c. 52.0%.

d. 5.1%.

Quick Check

MCE = Value-added time Throughput time= Process time Throughput time= 0.2 days10.4 days= 1.9%


78/109

Quick Check




Process 0.2 days

What is the delivery cycle time (DCT)?

a. 0.5 days.

b. 0.7 days.c. 13.4 days.

d. 10.4 days.


79/109




Process 0.2 days

What is the delivery cycle time (DCT)?

a. 0.5 days.

b. 0.7 days.c. 13.4 days.

d. 10.4 days.

Quick Check

DCT = Wait time + Throughput time= 3.0 days + 10.4 days= 13.4 days


80/109

Predetermined Overhead Rates and OverheadAnalysis in a Standard Costing System

Appendix 11A


81/109


(Appendix 11A)

Compute and interpret the

fixed overhead budget andvolume variances.


82/109

Budgetvariance

Fixed Overhead Budget Variance

ActualFixed

Overhead

FixedOverheadApplied

BudgetedFixed

Overhead

Budgetvariance

Budgetedfixed

overhead

Actualfixed

overhead=


83/109

Volumevariance

Fixed Overhead Volume Variance

ActualFixed

Overhead


BudgetedFixed

Overhead

Volumevariance

Fixedoverheadapplied to

work in process

Budgetedfixed

overhead=


84/109

FPOHR = Fixed portion of the predetermined overhead rateDH = Denominator hoursSH = Standard hours allowed for actual output

SH FRDH FR

Fixed Overhead Volume Variance

ActualFixed

Overhead


BudgetedFixed

Overhead

Volume variance FPOHR (DHSH)=

Volumevariance

C i Fi d O h d V i


85/109

Computing Fixed Overhead Variances

Budgeted production 30,000 units Standard machine-hours per unit 3 hours

Budgeted machine-hours 90,000 hours

Actual production 28,000 units

Standard machine-hours allowed for the actual production 84,000 hours

Actual machine-hours 88,000 hours

Production and Machine-Hour Data

ColaCo

C ti Fi d O h d V i


86/109

Computing Fixed Overhead Variances

Budgeted variable manufacturing overhead 90,000$

Budgeted fixed manufacturing overhead 270,000

Total budgeted manufacturing overhead 360,000$

Actual variable manufacturing overhead 100,000$

Actual fixed manufacturing overhead 280,000Total actual manufacturing overhead 380,000$

ColaCo

Cost Data

P d t i d O h d R t


87/109

Predetermined Overhead Rates

Predeterminedoverhead rate

Estimated total manufacturing overhead costEstimated total amount of the allocation base

=


$360,00090,000 Machine-hours

=

Predeterminedoverhead rate = $4.00 per machine-hour

P d t i d O h d R t


88/109

Predetermined Overhead Rates

Variable component of thepredetermined overhead rate $90,00090,000 Machine-hours=

Variable component of thepredetermined overhead rate

= $1.00 per machine-hour

Fixed component of thepredetermined overhead rate

$270,00090,000 Machine-hours

=

Fixed component of thepredetermined overhead rate

= $3.00 per machine-hour

A l i M f t i O h d


89/109

Applying Manufacturing Overhead

Overheadapplied


Standard hours allowedfor the actual output

=

Overheadapplied

$4.00 permachine-hour

84,000 machine-hours=

Overhead

applied$336,000=

C ti th B d t V i


90/109

Computing the Budget Variance

Budgetvariance

Budgetedfixed

overhead

Actualfixed

overhead=

Budgetvariance

= $280,000 $270,000

Budgetvariance

= $10,000 Unfavorable

C ti th V l V i


91/109

Computing the Volume Variance

Volumevariance

Fixed

overheadapplied to

work in process

Budgetedfixedoverhead

=

Volumevariance

= $18,000 Unfavorable

Volumevariance

= $270,000$3.00 per

machine-hour( $84,000

machine-hours)

C ti th V l V i


92/109

Computing the Volume Variance

FPOHR = Fixed portion of the predetermined overhead rateDH = Denominator hoursSH = Standard hours allowed for actual output

Volume variance FPOHR (DHSH)=

Volumevariance

=$3.00 per

machine-hour (90,000

mach-hours

84,000mach-hours)

Volumevariance

= 18,000 Unfavorable

A Pi t i l Vi f th V i


93/109

A Pictorial View of the Variances

ActualFixed

Overhead

Fixed OverheadApplied to

Work in Process

BudgetedFixed

Overhead

252,000270,000280,000

Total variance, $28,000 unfavorable

Budget variance,

$10,000 unfavorable

Volume variance,

$18,000 unfavorable

Fixed Overhead VariancesA Graphic Approach


94/109

A Graphic Approach

Lets look at a

graph showingfixed overhead

variances. We will

use ColaCosnumbers from theprevious example.

Graphic Analysis of FixedOverhead Variances


95/109

Overhead Variances

Machine-hours (000)

Budget$270,000

90

Denominatorhours

00



96/109

Overhead VariancesActual

$280,000

Machine-hours (000)

Budget$270,000

90

Denominatorhours

00

Budget Variance 10,000 U{



97/109

Actual

$280,000

Applied$252,000

Machine-hours (000)

Budget$270,000

Overhead Variances

908400

Standardhours

Denominatorhours

Budget Variance 10,000 U

Volume Variance 18,000 U

{{

Reconciling Overhead Variances andUnderapplied or Overapplied Overhead


98/109

Underapplied or Overapplied Overhead

In a standardcost system:

Unfavorablevariances are equivalent

to underapplied overhead.

Favorablevariances are equivalentto overapplied overhead.

The sum of the overhead variancesequals the under- or overapplied

overhead cost for the period.

Reconciling Overhead Variances andUnderapplied or Overapplied Overhead


99/109

Underapplied or Overapplied Overhead

Predetermined overhead rate (a) 4.00$ per machine-hour Standard hours allowed for the actual output (b) 84,000 machine hours

Manufacturing overhead applied (a) (b) 336,000$

Actual manufacturing overhead 380,000$

Manufacturing overhead underapplied or

overapplied 44,000$ underapplied

Computation of Underapplied Overhead

ColaCo

Computing the Variable Overhead Variances


100/109


Variable manufacturing overhead rate varianceVMRV = (AH AR)(AH SR)

= $100,000(88,000 hours $1.00 per hour)= $12,000 unfavorable



101/109


Variable manufacturing overhead efficiency varianceVMEV = (AH SR)(SH SR)

= $88,000(84,000 hours $1.00 per hour)= $4,000 unfavorable

Computing the Sum of All Variances


102/109

Computing the Sum of All Variances

Variable overhead rate variance 12,000$ U Variable overhead efficiency variance 4,000 U

Fixed overhead budget variance 10,000 U

Fixed overhead volume variance 18,000 U

Total of the overhead variances 44,000$ U

Computing the Sum of All variances

ColaCo


103/109

Journal Entries to RecordVariances

Appendix 11B



104/109


(Appendix 11B)

Prepare journal entriesto record standard

costs and variances.

Appendix 11BJournal Entries to Record Variances


105/109

Journal Entries to Record Variances

We will use information from the Glacier Peak Outfittersexample presented earlier in the chapter to illustrate journal

entries for standard cost variances. Recall the following:

Material

AQ AP = $1,029AQ SP = $1,050SQ SP = $1,000MPV = $21 F

MQV = $50 U

Labor

AH AR = $26,250AH SR = $25,000SH SR = $24,000LRV = $1,250 U

LEV = $1,000 U

Now, lets prepare the entries to recordthe labor and material variances.

Appendix 11BRecording Material Variances


106/109

GENERAL JOURNAL Page 4

Date Description

Post.

Ref. Debit Credit

Raw Materials 1,050

Materials Price Variance 21

Accounts Payable 1,029

To record the purc hase of material

Work in Process 1,000Materials Quantity Variance 50

Raw Materials 1,050

To record the use of m aterial

Recording Material Variances

Appendix 11BRecording Labor Variances


107/109

GENERAL JOURNAL Page 4

Date Description

Post.

Ref. Debit Credit

Work in Process 24,000

Labor Rate Variance 1,250

Labor Efficiency Variance 1,000

Wages Payable 26,250

To record di rect labo r

Recording Labor Variances

Cost Flows in a Standard Cost System


108/109

Cost Flows in a Standard Cost System

Inventories are recorded at standard cost.

Variances are recorded as follows:

Favorable variances are credits, representingsavings in production costs.

Unfavorable variances are debits, representingexcess production costs.

Standard cost variances are usually closed out

to cost of goods sold. Unfavorable variances increase cost of goods sold.

Favorable variances decrease cost of goods sold.

End of Chapter 11


109/109

End of Chapter 11

chap011 standardcosting (1)

Documents