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Projecto variance
 

Projecto variance

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    Projecto variance Projecto variance Presentation Transcript

    • Analyzing andReporting Variances From Standards
    • Each variance we computed is the differencebetween an amount based on an actual resultand the corresponding budgeted amount – thatis , the actual amount of something and theamount it was supposed to be according to thebudget (Horngren,Datar,Foster,2003). By Nicolas Huguet
    • Static Budget Variance Favorable variance- has the effect of increasing(Horngren,Datar,Foster,2003) operating income relative to the budget amount. Unfavorable variance- has the effect of decreasing operating income relative to the budget amount(Horngren,Datar,Foster,2003).
    • Flexible- Budget Variance and Sales Volumen Variance Sales Volumen Variance- is the (Horngren,Datar,Foster,2003) difference between a flexible- budget amount and the corresponding static budget amount. Sales volumen flexible- budget static budget variance for = amount - amount the operating income Flexible- Budget Variance- is the difference between an actual result and the corresponding flexible- budget amount based on the output level in the budget period. flexible- budget Actual flexible budget variance = results - amount
    • Direct Material VariancesThe direct (Globusz, 2001-2010) material total variance is thedifference between what the output actually cost and what itshould have cost, in terms of material.From the example above the material total variance is given by: $1,000 units should have cost (x $50) 50,000 But did cost 46,075 Direct material total variance 3, 925
    • The Direct Material Price VarianceThis is the difference (Globusz, 2001-2010) between what the actualquantity of material used did cost and what it should have cost. $ 4,850 kgs should have cost (x $10) 48,500 But did cost 46,075
    • Direct Labour Total VarianceThe direct labour total variance is the differencebetween what the output should have cost andwhat it did cost, in terms of labour (Globusz, 2001-2010).$ 1,000 units should have cost (x $20) 20,000But did cost 21,210Direct material price variance 1,210
    • The Direct Labor Efficiency Variance The is the (Globusz, 2001-2010) difference between how many hours should have been worked for the number of units actually produced and how many hours were worked, valued at the standard rate per hour.$ 1,000 units should have taken (x 4 hrs) 4,000 hrsBut did take 4,200 hrsVariance in hrs 200 hrsValued at standard rate per hour x $5Direct labour efficiency variance $1,000
    • Variable Production Overhead Total VariancesThe variable (Globusz, 2001-2010) production overhead totalvariance is the difference between what the output should havecost and what it did cost, in terms of variable productionoverhead.The variable production overhead expenditure variance$ 1,000 units should have cost (x $8) 8,000But did cost 9,450Variable production o/hd expenditure variance 1,450
    • The Variable Production Overhead Efficiency VarianceThis is the same (Globusz, 2001-2010) as the directlabour efficiency variance in hours, valued at thevariable production overhead rate per hour.Labor efficiency variance in hours 200 hrsValued @ standard rate per hour x $2Variable production o/hd efficiency variance $400
    • Fixed Production Overhead Volume VarianceThis is the (Globusz, 2001-2010) difference between actualand budgeted production volume multiplied by the standardabsorption rate per unit. Actual production at std rate (1,000 x $24) 24,000 Budgeted production at std rate (1,200 x $24) 28,800 4,800
    • Direct Materials Variance  By J. Santana
    • Setting Standard Costs—A Difficult TaskDirect Materials The direct materials price standard is the cost per unit of direct materials that should be incurred.
    • Setting Standard Costs—A Difficult Task Direct Materials The direct materials quantity standard is the quantity of direct materials that should be used per unit of finished goods.The standard direct materials cost is $12.00($3.00 × 4.0 pounds).
    • Analyzing and Reporting VariancesIllustration: Inman Corporation manufactures a single product.The standard cost per unit of product is shown below. Direct materials—2 pounds of plastic at $5.00 per pound $ 10.00 Direct labor—2 hours at $12.00 per hour 24.00 Variable manufacturing overhead 12.00 $18.00 Fixed manufacturing overhead 6.00 Total standard cost per unit $ 52.00The predetermined manufacturing overhead rate is $9 perdirect labor hour ($18.00/2). It was computed from a mastermanufacturing overhead budget based on normal production of180,000 direct labor hours for (90,000 units) .
    • Analyzing and Reporting VariancesThe master budget showed total variable costs of $1,080,000($6.00 per hour) and total fixed overhead costs of $540,000($3.00 per hour). Actual costs for November in producing7,600 units were as follows. Direct materials (15,000 pounds) $ 73,500 Direct labor (14,900 hours) 181,780 Variable overhead 88,990 Fixed overhead 44,000 Total manufacturing costs $ 388,270The purchasing department buys the quantities of rawmaterials that are expected to be used in production eachmonth. Raw materials inventories, therefore, can be ignored.
    • Analyzing and Reporting Variances Direct Materials Variances In producing 7,600 units, the company used 15,000 pounds of direct materials. These were purchased at a cost of $4.90 per unit ($73,500/15,000 pounds). The standard quantity of materials is 15,200 pounds (7,600 × 2). The total materials variance is computed from the following formula.Actual Quantity Standard Quantity Total Materials× Actual Price - × Standard Price = Variance[(AQ) × (AP)] [(SQ) × (SP)] (TMV)$73,500 - $76,000(15,000 × $4.90) (15,200 × $5.00) = $2,500 F
    • Analyzing and Reporting Variances Direct Materials Variances Next, the company analyzes the total variance to determine the amount attributable to price (costs) and to quantity (use). The materials price variance is computed from the following formula.Actual Quantity Actual Quantity Materials Pricex Actual Price - x Standard Price = Variance[(AQ) × (AP)] [(AQ) × (SP)] (MPV)$73,500 - $75,000(15,000 × $4.90) (15,000 × $5.00) = $1,500 F
    • Analyzing and Reporting Variances Direct Materials Variances The materials quantity variance is determined from the following formula. MaterialsActual Quantity Standard Quantity× Standard Price - × Standard Price = Quantity Variance[(AQ) × (SP)] [(SQ) × (SP)] (MQV)$75,000 - $76,000(15,000 × $5.00) (15,200 × $5.00) = $1,000 F Companies sometimes use a matrix to analyze a variance.
    • Matrix for Direct Materials Variances 1 2 3Actual Quantity Actual Quantity Standard Quantity× Actual Price × Standard Price × Standard Price[(AQ) × (AP)] [(AQ) × (SP)] [(SQ) × (SP)]15,000 × $4.90 = $73,500 15,000 × $5.00 = $75,000 15,200 × $5.00 = $76,000 Price Variance Quantity Variance 1 - 2 2 - 3 $73,500 – $75,000 = $1,500 F $75,000 – $76,000 = $1,000 F Total Variance 1 - 3 $73,500 – $76,000 = $2,500 F
    • Analyzing and Reporting VariancesCauses of Material Variances Materials Price Variance – Factors that affect the price paid for raw materials include the availability of quantity and cash discounts, the quality of the materials requested, and the delivery method used. To the extent that these factors are considered in setting the price standard, the purchasing department is responsible. Materials Quantity Variance – If the variance is due to inexperienced workers, faulty machinery, or carelessness, the production department is responsible.
    • Analyzing and Reporting Variances From Standards (Direct Labor Variances)By Marcos J. Morales
    • Analyzing and Reporting Variances From Standards (Direct Labor Variances)One of the major management uses of standardcosts is to identify variances from standards.Variances are the differences between totalactual costs and total standard costs.
    • Analyzing and Reporting VariancesCauses of Labor VariancesLabor Price Variance – Usually results from two factors:(1) paying workers higher wages than expected(2) misallocation of workers. The manager who authorized the wage increase is responsible for the higher wages. The production department generally is responsible variances resulting from misallocation of the workforce.Labor Quantity Variances - Relates to the efficiency of workers. The cause of a quantity variance generally can be traced to the production department.
    • Analyzing and Reporting Variances When actual costs exceed standard costs, the variance is unfavorable. When actual costs are less than standard costs, the variance is favorable.To interpret properly the significance of avariance, you must analyze it to determine theunderlying factors. Analyzing variances begins bydetermining the cost elements that comprise thevariance.
    • Setting Standard Costs—A Difficult TaskDirect Labor The direct labor price standard is the rate per hour that should be incurred for direct labor.
    • Setting Standard Costs—A Difficult Task Direct Labor The direct labor quantity standard is the time that should be required to make one unit of the product.The standard direct labor cost is $20($10.00 × 2.0 hours).
    • Analyzing and Reporting Variances (Cost Breakdown)Illustration: Inman Corporation manufactures a single product.The standard cost per unit of product is shown below. Direct materials—2 pounds of plastic at $5.00 per pound $ 10.00 Direct labor—2 hours at $12.00 per hour 24.00 Variable manufacturing overhead 12.00 $18.00 Fixed manufacturing overhead 6.00 Total standard cost per unit $ 52.00The predetermined manufacturing overhead rate is $9 perdirect labor hour ($18.00/2). It was computed from a mastermanufacturing overhead budget based on normal production of180,000 direct labor hours for (90,000 units) .
    • Standard Cost Accounting Procedure for Labor: Actual hours worked (AH) 1,880 Actual rate paid per hour (AR) $ 6.50 Standard hours allowed for actual production (SH) 1,590 Standard rate per hour (SR) $ 6.00
    • The following journal entry is passed to record the actual direct labor payroll, assuming that there were no payroll deductions. Dr. Cr.Payroll (AH x AR) (1880 x $6.50) $ 12,220.00 Accrued Payroll (AH x AR) (1880 x $6.50) $12,220.00 Actual hours worked (AH) 1,880.00 Actual rate paid per hour (AR) $ 6.50 Standard hours allowed for actual production (SH) 1,590.00 Standard rate per hour (SR) $ 6.00
    • Matrix for Direct Labor Variances 1 2 3Actual Hours Actual Hours Standard Hours× Actual Rate × Standard Rate × Standard Rate(AH) × (AR) (AH) × (SR) (SH) × (SR)1,880 x $6.50 = $12,220 1,880 x $6.00 = $11,280 1,590 x $6.00 = $9540 Labor Price Variance Labor Quantity Variance 1 - 2 2 - 3 $12,220 – $11,280 = $940.00 U $11,280 – $9,540 = $1,740 U Actual hours worked (AH) 1,880.00 Total VarianceActual rate paid per hour 1 - 3 (AR) $ 6.50Standard hours allowed for actual production $12,220 – $9,540 = $2,680 U (SH) 1,590.00 Standard rate per hour (SR) $ 6.00
    • Journal Entry for Direct Labor Variance (Format)Work in Process (SH x SR) XXXLabor Rate Variance [(AR-SR)AH] XXX or XXXLabor Efficiency Variance [(AH-SH)SR] XXX or XXX Wages Payable (AH x AR) XXX
    • Journal Entry for Direct Labor Variance Dr. Cr. Work in Process ($1,590 x $6.00) $ 9,540.00 Labor Rate Variance [($6.50-$6.00) x 1880] $ 940.00 Labor Efficiency Variance [(1880-1590) x $6.00] $ 1,740.00 Wages Payable (1880 x $6.50) $ 12,220.00 Actual hours worked (AH) 1,880.00Actual rate paid per hour (AR) $ 6.50Standard hours allowed for actual production (SH) 1,590.00 Standard rate per hour (SR) $ 6.00
    • “Favorable” Variances May be UnfavorableThe fact that a variance is favorable does not mean that it should not be investigated. Indeed, a favorable variance may be indicative of poor management decisions. For example: A favorable material price variance may be arisen from purchasing goods of inadequate quality for production. A favorable overhead volume variance could mean that excessive inventory has been produced beyond customer demand.
    • By Mario Félix
    • Manufacturing Overhead Variances- overhead varianceoverhead variance is generally analyzed through a price variance and a quantity variance.- overhead controllable varianceoverhead Controllable Variance shows whether overhead costs are effectively controlled. (varianza de precio)- overhead volume varianceoverhead Volume Variance relates to whether fixed costs were under- or over-applied during the year. (varianza de cantidad)
    • Before computing overhead always remember- The controllable variance generally is for the variable costs.- Standard hours allowed are used in each of the variances.- Budgeted costs for the controllable variance are derived from the flexible budget.
    • Total Overhead varianceWhat is the total overhead variance?The difference between actual overhead costs and overhead costs applied to work done.Ex.Total overhead costs:Variable overhead $ 50,000 +Fixed overhead $50,000 = 100,000Overhead applied:Standard hours allowed 10,000 *Rate per direct labor hour 9 =90,000Total Overhead Variance = 10,000
    • Overhead Volume VarianceWhat is the Volume Variance?Is the difference normal capacity hours and standard hours allowed time the fixed averhead.Ex.Budget Overhead:Normal capacity in hours 500 -Standard hours allowed 450= 50 *Fixed overhead rate ($8/4) 2Overhead volume variance= 100
    • Overhead Controllable VarianceWhat is the overhead controllable variance?Compare the actual overhead cost in budget cost for the standar hours allowed.Ex.Budget overhead: 10,000 -Actual overhead costs: 8,000Overhead controllable variance= 2,000
    • In Controllable Variance: unfavorable variance in the production department may be caused by increase use of:-Indirect manufacturing costs-Factory Supplies-Indirect labor-Indirect materialIn the overhead Volume Variance: unfavorable variance in the production department may be caused by:-inefficient use of direct labor or machine breakdowns
    • Analyzing and Reporting VariancesReporting Variances All variances should be reported to appropriate levels of management as soon as possible. The form, content, and frequency of variance reports vary considerably among companies. Facilitate the principle of ―management by exception.‖ Top management normally looks for significant variances.
    • Reporting Variances
    • Analyzing and Reporting VariancesReporting VariancesMaterials price variance report for Xonic, Inc., with the materials for theWeed-O order listed first.
    • Statement Presentation of Variances
    • Analyzing and Reporting VariancesStatementPresentationof VariancesIn income statementsprepared formanagement under astandard costaccounting system,cost of goods sold isstated at standardcost and thevariances aredisclosed separately.
    • Horgren,Datar,Foster,(2003) Cost Accounting A Managerial Emphasis, EleventhEdition, Prentice Hall Upper Saddle River , NJ 07458www.globusz.com/ebooks/costing/00000015.htmManagerial Accounting: Tools for Business Decision Making, 5th Edition,Jerry J. Weygandt (University of Wisconsin, Madison), Paul D. Kimmel(University of Wisconsin-Milwaukee), Donald E. Kieso (Northern IllinoisUniversity) October 2009, ©2010http://www.principlesofaccounting.com/chapter%2017.htm#SCHEDULE OFCOST OF GOODS MANUFACTURED
    • Questions?Today is a great day to be an accountant!!!!