Chapter 10 Flexible Budgets And Standard Cost A How do Managers use Flexible Budgets a Static Budget prepared with one level of sales volume the master budget is considered a static budget because it is i Variance b Flexible Budgets difference between actual results and budgeted results are summarized budgets prepared for different levels of volume i Making multiple budgets with different sales volume estimated ii Follows Total cost line B Sales Volume Flexible Budget Variance a Sales Volume Variance budget and the flexible budget for the actual number of outputs b Flexible Budget Variance and the actual results is the difference between the static master is the difference between the flexible budget i Company earns more or less revenue or incurred more or less C Standard Costs expenses than expected for the actual level of output as a budget for a single unit a Use standard quantity per unit b Use standard price per unit c Use standard price per labor hour and how many hours needed to manufacture product d Standard Manufacturing Overhead rates Standard Variable Overhead Rates Estimated Total Variable Overhead Cost Estimated Total quality of allocation base 64 000 3 200 direct labor hours 2 per direct labor hour Standard Fixed Overhead Rate Estimated Total fixed overhead cost Estimated total quality of allocation base 12 000 3 200 direct labor hours 3 75 per labor hour Standard Overhead Rate Variable Overhead Rate Fixed Overhead Rate 2 direct labor hour 3 75 direct labour hour 5 75 direct labor hour e Standard Cost of Inputs i Standard Cost of Input Quantity Standard Price Standard Direct Materials Standard Cost Direct Labor Standard Cost Variable Overhead Standard Cost Fixed Overhead Standard Cost Standard Manufacturing Cost unit f benefits of standard costs i Standards help managers plan by providing unit amounts for ii Help mangers control operations by setting target levels of iii Motivates employees by performing benchmarks iv Provide Unit costs managers can use to set sale prioces of products budgeting performance or services v Simplify record keeping and reduce clerical costs D Use of Standard Cost a Direct Materials Variance i Price Variance of materials and labor inputs within standards measures how well the business keeps unit prices Actual Price per Unit Standard Price per Unit Actual Quantity of Input ii Effivenct Variance measures whether the firm its quantity standards Actual Quanty of Input Standard qty of input allowed for the actual number of outputs standard price per unit b Direct Labor Variances i Price Variance ii Efficency Variance same as for materials same as for materials
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