Bài giảng Fundamentals of cost accounting - Chapter 16: Fundamentals of Variance Analysis

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.  Fundamentals of Variance AnalysisChapter 16Learning ObjectivesLO 16-1 Use budgets for performance evaluation.LO 16-2 Develop and use flexible budgets.LO 16-3 Compute and interpret the sales activity variance.LO 16-4 Prepare and use a profit variance analysis.LO 16-5 Compute and use variable cost variances.LO 16-6 Compute and use fixed cost variances.LO 16-7 (Appendix) Understand how to record costs in a standard costing system.Using Budgets forPerformance EvaluationLO 16-1 Use budgets for performance evaluation.Operating Budgets Budgeted income statement, production budget, budgeted cost of goods sold, and supporting budgetsFinancial Budgets Budgets of financial resources; for example, the cash budget and the budgeted balance sheetVariance Difference between planned result and actual outcomeLO 16-1Profit VarianceFavorable Variance Variance that, taken alone, increases operating profitUnfavorable Variance Variance that, taken alone, reduces operating profitLO 16-1Profit VarianceBayou DivisionBudget and Actual ResultsAugustSales (units)Sales revenueLess: Variable costs Variable mfg. costs Variable selling and administrativeTotal variable costsContribution marginFixed costs: Fixed manufacturing overhead Fixed selling and administrative costsTotal fixed costsProfit 80,000$840,000 329,680 68,000$397,680$442,320 195,500 132,320$327,820$114,500 100,000a$1,000,000 380,000b 90,000c$ 470,000$ 530,000 200,000 140,000$ 340,000$ 190,000ActualVarianceMasterBudgeta $10.00 per unit b $3.80 per unit c $0.90 per unitLO 16-1Profit VarianceBayou DivisionBudget and Actual ResultsAugustSales (units)Sales revenueLess: Variable costs Variable mfg. costs Variable selling and administrativeTotal variable costsContribution marginFixed costs: Fixed manufacturing overhead Fixed selling and administrative costsTotal fixed costsProfit 80,000$840,000 329,680 68,000$397,680$442,320 195,500 132,320$327,820$114,500 20,000 U$160,000 U 50,320 F 22,000 F$ 72,320 F$ 87,680 U 4,500 F 7,680 F$ 12,180 F$ 75,500 U 100,000a$1,000,000 380,000b 90,000c$ 470,000$ 530,000 200,000 140,000$ 340,000$ 190,000ActualVarianceMasterBudgeta $10.00 per unit b $3.80 per unit c $0.90 per unitLO 16-1Flexible BudgetingLO 16-2 Develop and use flexible budgets.Static Budget Budget for a single activity level; usually the master budgetFlexible Budget Budget that indicates revenues, costs, and profits for different levels of activityLO 16-2Sales Activity VarianceLO 16-3 Compute and interpret the sales activity variance.Sales Activity Variance The difference between operating profit in the master budget and operating profit in the flexible budget that arises because the actual number of units sold is different from the budgeted numberLO 16-3Sales Activity VarianceBayou DivisionFlexible and Master BudgetAugustSales (units)Sales revenue (@ $10.00 per unit)Less: Variable costs Variable mfg. costs (@ $3.80 per unit) Variable selling and admin. (@ $0.90 per unit)Total variable costsContribution marginFixed costs: Fixed manufacturing overhead Fixed selling and administrative costsTotal fixed costsProfit 80,000$800,000 304,000 72,000$376,000$424,000 200,000 140,000$340,000$ 84,000 20,000 U$200,000 U 76,000 F 18,000 F$ 94,000 F$106,000 U -0- -0- -0-$106,000 U 100,000$1,000,000 380,000 90,000$ 470,000$ 530,000 200,000 140,000$ 340,000$ 190,000FlexibleBudgetSales-ActivityVarianceMasterBudgetLO 16-3Profit Variance AnalysisLO 16-4 Prepare and use a profit variance analysis. Profit Variance Analysis Analysis of the causes of differences between budgeted profits and the actual profits earnedSales price varianceFixed production cost variancesVariable production cost variancesMarketing and administrative cost variancesLO 16-4Profit Variance AnalysisSales (units)Sales revenueLess: Variable costs Variable manufacturing costsa Variable selling and administrativeContribution marginFixed costs: Fixed manufacturing overhead Fixed selling and administrative costsProfit$25,680 U $25.680 U 4,500 F $21,180 UMfg.Variances$ 4,000 F$ 4,000 F 7,680 F$11,680 FMarketingand Admin.VariancesActual 80,000$840,000 329,680 68,000$442,320 195,500 132,320$114,500$40,000 F $40,000 F $40,000 FSalesPriceVariance 80,000$800,000 304,000 72,000$424,000 200,000 140,000$ 84,000FlexibleBudget$200,000 U 76,000 F 18,000 F$106,000 U -0- -0- $106,000 U SalesActivityVariance 100,000$1,000,000 380,000 90,000$ 530,000 200,000 140,000$ 190,000MasterBudgetBayou DivisionProfit Variance AnalysisAugustTotal variance from flexiblebudget = $30,500 FTotal variance from master budget = $75,500 Ua The $25,680 manufacturing variance is explained in detail in LO 16.5.LO 16-4Sales Price VarianceSales Price Variance Difference between the actual selling price and budgeted selling price multiplied by the actual number of units sold($10.50 - $10) x 80,000 units = $40,000 FLO 16-4Variable Production CostsStandard Cost Sheet A form providing the standard quantities of each input required to produce a unit of output and the standard price for each input.Direct materialDirect laborVariable overheadTotal variable manufacturing costs4 pounds0.05 hours0.05 hours$0.55 per pound$20 per hour$12 per hour$2.20 1.00 0.60$3.80StandardQuantity of Inputper Unit of OutputStandard InputPrice or Rateper Unit of InputStandard Costper Unit ofOutput (frame)Bayou DivisionStandard Cost Sheet – Variable Manufacturing CostsAugustLO 16-4Variable Cost Variance AnalysisLO 16-5 Compute and use variable cost variances.(1)Actual(AP × AQ)(2)Actual Inputs atStandard Prices(SP × AQ)(3)Flexible ProductionBudget(SP × SQ)Total variance(1) – (3)Actual input price (AP)times actual quantity(AQ) of inputStandard input price (SP)times actual quantity(AQ) of inputStandard input price (SP)times standard quantity(SQ) of input allowed foractual good outputPrice variance(1) – (2)Efficiency variance(2) – (3)LO 16-5Production Cost VariancePrice Variance Difference between actual price and budgeted price Multiply this difference by the actual quantity purchased.Price variance = (AP × AQ) – (SP × AQ) = AQ(AP – SP)LO 16-5Production Efficiency VarianceEfficiency Variance Difference between the actual quantity used and the budgeted quantity for the actual level of activity. Multiply this difference by the budgeted price per unit.Price variance = (SP × AQ) – (SP × SQ) = SP(AQ – SQ)LO 16-5Direct Materials Variance(1)Actual(2)Actual Inputs atStandard Prices(3)Flexible ProductionBudgetActual materials price(AP = $0.60)× Actual quantity(AQ = 328,000 pounds)of direct materialsStandard materials price(SP = $0.55)× Actual quantity(AQ = 328,000 pounds)of direct materialsStandard materials price(SP = $0.55)× Standard quantity(SQ = 320,000 pounds)of direct materialsallowed for actual outputAP × AQ = $196,800SP × AQ = $180,400SP × SQ = $176,000Total variance= $16,400 + $4,400 = $20,800 UPrice variance$196,800 – $180,400= $16,400 UEfficiency variance$180,400 – $176,000= $4,400 ULO 16-5Direct Labor Variance(1)Actual(2)Actual Inputs atStandard Prices(3)Flexible ProductionBudgetActual labor price(AP = $18)× Actual quantity(AQ = 4,400 hours)of direct laborStandard labor price(SP = $20)× Actual quantity(AQ = 4,400 hours)of direct laborStandard labor price(SP = $20)× Standard quantity(SQ = 4,000 hours)of direct laborallowed for actual outputAP × AQ = $79,200SP × AQ = $88,000SP × SQ = $80,000Total variance= $8,800 – $8,000 = $800 FPrice variance$79,200 – $88,000= $8,800 FEfficiency variance$88,000 – $80,000= $8,000 ULO 16-5Variable Overhead Variance(1)Actual(2)Actual Inputs atStandard Prices(3)Flexible ProductionBudgetSum of actualvariablemanufacturingoverhead costsStandard variableoverhead price(SP = $12)× Actual quantity(AQ = 4,400 hours)of the overhead baseStandard variableoverhead price (SP = $12)× Standard quantity(SQ = 4,000 hours)of the overhead base allowedfor actual output producedAP × AQ = $53,680SP × AQ = $52,800SP × SQ = $48,000Total variance= $880 + $4,800 = $5,680 UPrice variance$53,680– $52,800= $880 UEfficiency variance$52,800– $48,000= $4,800 ULO 16-5Variable ManufacturingCost Variance SummaryDirect materialsDirect laborVariable overheadTotal variable manufacturing cost variance$16,400 U$ 8,800 F$ 880 U$4,400 U$8,000 U$4,800 U$20,800 U$ 800 F$ 5,680 U$25,680 UPriceEfficiencyTotalLO 16-5Fixed Cost VariancesLO 16-6 Compute and use fixed cost variances. Spending (or budget) variance Price variance for fixed overhead The difference between budgeted and actual fixed overhead $195,500 actual – $200,000 budget = $4,500 FLO 16-6Fixed Cost VariancesThe difference between budgeted and applied fixed overheadVariance that arises because the volume used to apply fixed overhead differs from the estimated volume used to estimate fixed cost per unit. $200,000 budget – $160,000 applied = $40,000 U$200,000 budget ÷ 100,000 budgeted units = $2 per unit80,000 units × $2 per unit = $160,000 appliedLO 16-6Appendix: Recording Costsin a Standard Cost SystemLO 16-7 (Appendix) Understand how to record costs in a standard costing system.Work-in-process inventory is debited when direct materials and direct labor are used at standard.Work-in-process inventory is debited when manufacturing overhead is applied at standard.When the units are finished, work-in-process inventory is credited and finished goods inventory is debited.Variances are usually closed to cost of goods sold. LO 16-7End of Chapter 16