cost accounting
6&7 – Variance analysis
Variance analysis: Reason for variance: 1.Price/rate/spending variances: Standard is out of date; Standard set without due care; Efficient or inefficient buying (e.g., discounts); Buying different quality material from standard; Buying materials from a non‑usual source due to urgency; Utilising different labour from standard; Price changes due to economic conditions; scarcity of supplies; Choosing to incur additional discretionary fixed costs; More (or less) overtime hours used than budgeted. 2. Efficiency/usage/quantity variances: Standard is out of date, set without due care; Inefficient use of material/labour, deliberate or otherwise; Poor supervision/equipment/maintenance.Changes in the production process.Learning period associated with process changes.Efficiencies from different quality of material or labour from standard; More efficient manufacturing than expected in the standard; Materials not being available causing idle time; Poor production scheduling; Industrial disputes; Materials not properly recorded in and out of storeroom. 3.Fixed overhead volume: Standard is out of date; Standard set without due care, i.e. poor estimation of denominator activity; Any occurrence causing the firm to produce a number of units different from budgeted production.
Standard costing is an acceptable method of valuing inventories under AASB102 provided the following requirements satisfied: results approximate actual ; normal levels of materials, labour, efficiency, capacity; variances treated appropriately
Standard costing involves: Determining the std cost of DM, DL (as above) and OH; and Entering those amounts on the job cost sheets and through MATERIALS, WIP, FG and COGS.
Budgeted qty (BQ) means the qty (of material, labour etc) we: should have used for units we expected to produce
Standard qty (SQ) means the qty we: should have used for units we did produce
Actual qty (AQ) means the qty we: did use for units we did produce
---Journal
Variance analysis: Reason for variance: 1.Price/rate/spending variances: Standard is out of date; Standard set without due care; Efficient or inefficient buying (e.g., discounts); Buying different quality material from standard; Buying materials from a non‑usual source due to urgency; Utilising different labour from standard; Price changes due to economic conditions; scarcity of supplies; Choosing to incur additional discretionary fixed costs; More (or less) overtime hours used than budgeted. 2. Efficiency/usage/quantity variances: Standard is out of date, set without due care; Inefficient use of material/labour, deliberate or otherwise; Poor supervision/equipment/maintenance.Changes in the production process.Learning period associated with process changes.Efficiencies from different quality of material or labour from standard; More efficient manufacturing than expected in the standard; Materials not being available causing idle time; Poor production scheduling; Industrial disputes; Materials not properly recorded in and out of storeroom. 3.Fixed overhead volume: Standard is out of date; Standard set without due care, i.e. poor estimation of denominator activity; Any occurrence causing the firm to produce a number of units different from budgeted production.
Standard costing is an acceptable method of valuing inventories under AASB102 provided the following requirements satisfied: results approximate actual ; normal levels of materials, labour, efficiency, capacity; variances treated appropriately
Standard costing involves: Determining the std cost of DM, DL (as above) and OH; and Entering those amounts on the job cost sheets and through MATERIALS, WIP, FG and COGS.
Budgeted qty (BQ) means the qty (of material, labour etc) we: should have used for units we expected to produce
Standard qty (SQ) means the qty we: should have used for units we did produce
Actual qty (AQ) means the qty we: did use for units we did produce
---Journal