ACTG 2020 Chapter Notes - Chapter 10: Variable Cost, Customer Satisfaction, Standard Cost Accounting
2 May 2017
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Actual costs/quantities compared to standards periodically: management by exception system where differences between actual and projected costs brought to management attention as exceptions . Combines expertise of everyone who has responsibility for purchasing/using inputs (i. e. accountants, managers) Past records of purchase prices and input usage often helpful. Should be designed to encourage efficient future operations, not repetition of past. Setting direct materials standards: standard price per unit price that should be paid for single unit of material (shipping, receiving etc. net of discounts) Standard price x standard quantity = standard cost record of product (i. e. 3kg/unit x /kg = /unit) Standard labour cost per unit = standard rate per hour x standard hours per unit (i. e. 2. 5hrs/unit x /hr = Rate represents variable portion of predetermined overhead rate - requires unit cost of overhead and quantity required: unit costs relatively straightforward can be based on prior year amounts or current supplier contracts.
