tailieunhanh - Lecture Management accounting: An Australian perspective: Chapter 10 - Kim Langfield-Smith

This chapter introduce the standard costs for control: Direct material and direct labour. Learning objectives of this chapter include: Controlling costs, setting standards, investigating significant variances and taking corrective actions,.and another contents. | Chapter 10 Standard costs for control: Direct material and direct labour Controlling costs Businesses are in control when operations proceed to plan and objectives are achieved Necessary requirements for control A predetermined or standard performance level A measure of actual performance; and A comparison between standard performance and actual performance Control systems: a thermostat Controlling costs Standard costing is a part of the budgetary control system A predetermined or standard cost is developed A standard cost is a budget for the production of one unit of a product, either goods or services The actual cost incurred is measured continued Controlling costs The actual cost is compared to the budgeted or standard cost, to form a standard cost variance Standard cost variances are used to evaluate actual performance and control costs Standard costs can be developed for direct material, direct labour and overheads Setting standards A variety of methods may be . | Chapter 10 Standard costs for control: Direct material and direct labour Controlling costs Businesses are in control when operations proceed to plan and objectives are achieved Necessary requirements for control A predetermined or standard performance level A measure of actual performance; and A comparison between standard performance and actual performance Control systems: a thermostat Controlling costs Standard costing is a part of the budgetary control system A predetermined or standard cost is developed A standard cost is a budget for the production of one unit of a product, either goods or services The actual cost incurred is measured continued Controlling costs The actual cost is compared to the budgeted or standard cost, to form a standard cost variance Standard cost variances are used to evaluate actual performance and control costs Standard costs can be developed for direct material, direct labour and overheads Setting standards A variety of methods may be used to set cost standards Analysis of historical data Can provide a good basis for predicting future costs May need to be adjusted to reflect expected movements in price levels or technological changes into the product process Must be used with care as changes can make those costs irrelevant, and can include inefficiencies of the past continued Setting standards Engineering methods Rather than what did it cost in the past, the focus is on what should it cost in the future? Need to determine how much material should be required and how much direct labour should be used in the production process Time and motion studies may be conducted to ascertain how long it should take for workers to perform each step In practice both historical cost analysis and engineering methods may be used in combination continued Setting standards Participation in setting standards Standards should not be set by accountants alone People will usually be more committed to meeting standards and have greater .