Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020
Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020
Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020
Prepared by:
Junior Philippine Institute of
Accountants UC-Banilad Chapter
F.Y. 2019-2020
Standard Costs &
Variance Analysis
Definitions
1. Basic. These are not changed from period to period and are used in the
same way as an index number.
2. Maximum efficiency. These are perfect standards assuming ideal,
optimal conditions, allowing for no losses of any kind, even those
considered unavoidable. They will always result in unfavorable variances.
3. Currently attainable (practical).These refer to the volume of output
possible if a facility operated continuously, but after allowing for normal
and unavoidable losses such as vacations, holidays, and repairs. Currently
attainable standards are based on efficient activity. They are possible but
difficult to achieve.
4. Expected. These are expected figures based on foreseeable operating
conditions and costs. They come very close to actual figures.
4
Capacity Standards
6
Example
Quantity Unit Price Amount
Actual 775,000 lbs. P 3.90 P3,022,500
-Standard (150,000 units × 5 lbs.) 750,000 4.00 3,000,000
Variances-UF(F) 25,000 UF P(0.10) F P(22,500) F
Solution: (2-way)
MPV = (AP-SP) × AQ = (P3.90-P4.00) × 775,000 lbs. = P(77,500) F
MQV = (AQ-SQ) × SP = (775,000-750,000) × P4.00 = 100,000 UF
Net Direct Materials Costs Variance P 22,500 UF
(3-way)
MPV = (AP-SP) × SQ = (P3.90-P4.00) × 750,000 lbs. = P(75,000) F
MQV = (AQ-SQ) × SP = (775,000-750,000) × P4.00 = 100,000 UF
JMV = (AP-SP) × (AQ-SQ) = (3.90-4.00) × (775,000-750,000) = ( 2,500) F
Net Direct Materials Costs Variance P 22,500 UF
7
Direct Labor Costs Variance Analysis
8
Example
Solution: (2-way)
LRV = (AR-SR) × AH = (P8.15-P8.00) × 400,000 hrs. = P 60,000 UF
LEV = (AH-SH) × SR = (400,000-450,000) × P8.00 = (400,000) F
Net Direct Labor Costs Variance =P(340,000) F
(3-way)
LRV = (AR-SR) × SH = (P8.15-P8.00) × 450,000 hrs. = P 67,500 UF
LEV = (AH-SH) × SR = (400,000-450,000) × P8.00 = (400,000) F
JLV = (AR-SR) × (AH-SH) = (P8.15-P8.00) × (400,000-450,000) = (7,500) F
Net Direct Labor Costs Variance =P(340,000) F
9
CONCEPTS TO REMEMBER:
• If the standards set are too high, it will create dysfunctional employee
behavior. If is set too low, it would attract mediocre performance and would
not maximize the potentials of employees.
10
End of Topic
Please see complementary test bank for
practice problems and theories.
11
Dear, you.
Always be in pursuit for
the one you have not yet
become. Keep going!
Love,
Your UCB-JPIA family
12
Reference:
DOKUMEN .MAS REVIEWER - STANDARD COSTING.
Retrieved on August 15,2020 from
https://dokumen.tips/documents/mas-reviewer-
standard-costing.html#google_vignette
13