lOMoARcPSD|14828157 Standard costing - notes on topic Management Accounting CTA 2 (University of South Africa) StuDocu is not sponsored or endorsed by any college or university Downloaded by SOLEIL KIM (mygirl28.li@gmail.com) lOMoARcPSD|14828157 Standard costing The following variances are reported for both variable and absorption costing systems: Item Explanation Formula Materials Material price variance Compare standard price per unit of materials with the actual price SP/unit-AP/unit x AQ per unit purchased Material usage variance Difference between the standard quantity (SQ) required for actual production and the actual quantity (AQ) used multiplied by the standard material price (SP): SQ-AQ x SP/unit Total material variance Standard material cost - Actual material cost SC-AC Wage rate equal to the difference between the standard wage rate per hour (SR) and the actual wage rate (AR) multiplied by the actual number of hours worked (AH) SP/hour - AP/hour x AH Labour efficiency equal to the difference between the standard labour hours for actual production (SH) and the actual labour hours worked (AH) during the period multiplied by the standard wage rate per hour (SR): SQ - AQ x SP/hour Labour Total labour difference between the standard variable overheads charged to variance production (SC) and the actual variable overheads incurred (AC): SC-AC Variable overhead difference between the budgeted flexed variable overheads VAROH (BFVO) for the actual direct labour hours of input and the actual expenditure variable overhead costs incurred (AVO): VAROH efficiency difference between the standard hours of output (SH) and the actual hours of input (AH) for the period multiplied by the standard variable overhead rate (SR) Fixed Downloaded by SOLEIL KIM (mygirl28.li@gmail.com) SP x AQ - AC SQ-AQ x SP lOMoARcPSD|14828157 overheads FOH difference between the budgeted fixed overheads (BFO) and the expenditure actual fixed overhead (AFO) spending SC - AC Volume efficiency variance difference between the standard hours of output (SH) and the actual hours of input (AH) for the period multiplied by the standard fixed overhead rate (SR) SQ - AQ x SFOH Volume capacity variance difference between the actual hours of input (AH) and the budgeted hours of input (BH) for the period multiplied by the standard fixed overhead rate (SR) AQ - BQ x SFOH Total volume variance difference between actual production (AP) and budgeted production (BP) for a period multiplied by the standard fixed overhead rate (SR) BQ - AQ x SFOH Sales margin price variance difference between the actual selling price (ASP) and the standard selling price (SSP) multiplied by the actual sales volume (AV) AP-SP x AQ Sales margin volume variance difference between the actual sales volume (AV) and the budgeted volume (BV) multiplied by the standard contribution margin (SM) Total sales margin variance difference between actual sales revenue (ASR) less the standard variable cost of sales (SCOS) and the budgeted contribution (BC) ASales-SVariableCosts AQ-BQ x Scontri Reconciliation of budgeted and actual profit for a standard absorption costing system Budgeted net profit ● Sales margin volume = Standard profit on actual sales ● Sales margin price Downloaded by SOLEIL KIM (mygirl28.li@gmail.com) lOMoARcPSD|14828157 Direct cost variances: ● Material – Price ● Material - Usage ● Labour – Rate ● Labour Efficiency Manufacturing overhead variances: ● Fixed – Expenditure ● Volume ● Variable – Expenditure ● Efficiency = Actual manufacturing profit Downloaded by SOLEIL KIM (mygirl28.li@gmail.com)
