to illustrate the use of standard costs, consider the herman o. thompson sports, inc. aka
TRANSCRIPT
![Page 1: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/1.jpg)
![Page 2: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/2.jpg)
To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka
![Page 3: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/3.jpg)
Recall . . .
. . . standard cost card
![Page 4: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/4.jpg)
Quantity Price Cost
DM 3.5 Yards $6.00 $21.00
DL 2.0 Hours 18.00 36.00
VOH 2.0 Hours 4.00 8.00
Standard Cost Per Unit $65.00
![Page 5: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/5.jpg)
First, a General Model for Variance Analysis
AQ x AP AQ x SP SQ x SP
Total Variance
Variance Variance
Materials Price Var.
Labor Rate Var.
VOH Spending Var.
Material Quan Var.
Labor Eff. Var.
VOH efficiency Var.
![Page 6: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/6.jpg)
AQ x AP AQ x SP SQ x SP
Total Variance
Variance Variance
DM Price Variance
DL Rate Variance
VOH Spending Var.
DM Quantity Var.
DL Efficiency Var.
VOH Efficiency Var.
![Page 7: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/7.jpg)
Another Way to Calculate Variances
![Page 8: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/8.jpg)
DM Price Variances . . .
![Page 9: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/9.jpg)
DM Quantity Variances . . .
![Page 10: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/10.jpg)
An Example
Calculating Variances
![Page 11: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/11.jpg)
Calculating Direct Materials Variances
![Page 12: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/12.jpg)
Quantity Price Cost
DM 3.5 Yards $6.00 $21.00
DL 2.0 Hours 18.00 36.00
VOH 2.0 Hours 4.00 8.00
Standard Cost Per Unit $65.00
![Page 13: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/13.jpg)
Data for last month’s production:
# of suits completed
Cost of DM purchases (20,000 x $5.40)
Yards of material used
5,000
$108,000
20,000
![Page 14: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/14.jpg)
Using these data and the data from the standard cost card, calculate the material price and quantity variances.
![Page 15: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/15.jpg)
AQ x AP AQ x SP SQ x SP$20,000 x $5.40
$108,000
$20,000 x $6
$120,000
17,500 Yds x $6
$105,000
Price Variance
Quantity Variance
$3,000(U)
$12,000(F) $15,000(U)
Total Variance
![Page 16: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/16.jpg)
Alternative method – Direct Materials Price Variance
![Page 17: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/17.jpg)
Alternative method – Direct Materials Quantity Variance
![Page 18: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/18.jpg)
Isolating the Variances
![Page 19: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/19.jpg)
The objective of variance analysis is to isolate the variances as soon in the
process as possible.
![Page 20: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/20.jpg)
AQ x AP AQ x SP SQ x SP$20,000 x $5.40
$108,000
$20,000 x $6
$120,000
17,500 Yds x $6
$105,000
Price Variance
Quantity Variance
$3,000(U)
$12,000(F) $15,000(U)
Total Variance
![Page 21: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/21.jpg)
Placing Responsibility
For Variances
![Page 22: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/22.jpg)
AQ x AP AQ x SP SQ x SP$20,000 x $5.40
$108,000
$20,000 x $6
$120,000
17,500 Yds x $6
$105,000
Price Variance
Quantity Variance
$3,000(U)
$12,000(F) $15,000(U)
Total Variance
![Page 23: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/23.jpg)
Calculating Direct Labor Variances
![Page 24: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/24.jpg)
Data for last month’s production:
# of suits completed
Cost of Direct Labor (10,500 x $20)
5,000
$210,000
![Page 25: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/25.jpg)
Using these data and the data from the standard cost card, calculate the labor rate and efficiency variances.
![Page 26: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/26.jpg)
AH x AR AH x SR SH x SR10,500 Hrs x $20
$210,000
10,500 Hrs x $18
$189,000
10,000 Hrs x $18
$180,000
$30,000(U)
$21,000(U) $9,000(U)
Rate Variance
Efficiency Variance
![Page 27: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/27.jpg)
Alternative MethodDL Rate Variance
![Page 28: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/28.jpg)
Alternative MethodDL Efficiency Variance
![Page 29: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/29.jpg)
Calculating Variable Overhead
![Page 30: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/30.jpg)
Data for last month’s production:
# of suits completed 5,000
Actual DLHs 10,500
Actual VMOH $40,950
![Page 31: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/31.jpg)
Using these data and the data from the standard cost card, calculate the variable overhead variances.
![Page 32: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/32.jpg)
AH x AR AH x SR SH x SR
$950(U)
$1,050(F) $2,000(U)
Actual OH Cost
$40,950
10,500Hrs. x $4
$42,000
10,000 Hrs. x $4
$40,000
Spending Variance
Efficiency Variance
![Page 33: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/33.jpg)
Alternative MethodOverhead Spending Variance
![Page 34: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/34.jpg)
Alternative MethodOverhead Efficiency Variance
![Page 35: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/35.jpg)
This is still an accounting
class isn’t it?
Where are the journal entries. I
want journal entries!
![Page 36: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/36.jpg)
Purchase of Materials
Raw Materials
DM Price Variance
Accounts Payable
120,000
12,000
108,000
![Page 37: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/37.jpg)
Usage of Materials
Work in Process
DM Qty Variance
Raw Materials
105,000
15,000
120,000
![Page 38: To illustrate the use of standard costs, consider the Herman O. Thompson Sports, Inc. aka](https://reader033.vdocuments.us/reader033/viewer/2022051620/56649f2f5503460f94c497a5/html5/thumbnails/38.jpg)
Direct Labor Cost
Work in Process
Labor Rate Variance
Labor Eff Variance
180,000
21,000
9,000
Wages Payable 210,000