Standard Cost Summary Assignment

Standard Cost Summary
Standard Cost Summary

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Standard Cost Summary

ORDER INSTRUCTIONS:

Prepare a standard cost summary using a provided template, and then write a 1–2-page analysis of variances in a standard cost summary and how the variances could be corrected.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 1: Operate product-based cost accounting systems.
    • Apply procedures for recording standard costs to account for departmental factory costs.
    • Prepare journal entries related to standard costs.
  • Competency 4: Apply cost analysis to assist management decision making.
    • Analyze favorable and unfavorable variances for management decision making.
    • Analyze how variances can be corrected.

Standard Cost Summary

Context

All production costs, other than direct materials and direct labor, are lumped together into one category, termed overhead. In a manufacturing company, overhead is also known as factory burden, or manufacturing overhead. This cost category contains a wide variety of cost items. Many inputs, other than direct materials and direct labor, are needed to produce a finished product. Examples include:

  • Depreciation on buildings and equipment.
  • Maintenance.
  • Supplies.
  • Supervision.
  • Materials handling.
  • Power.
  • Landscaping of factory grounds.
  • Property taxes.
  • Plant security.

Standard Cost Summary

There are a number of procedures associated with the handling of overhead costs. They include:

  • Identification of each overhead cost’s behavior.
  • Determination of the budget for overhead costs.
  • Recording and tracking actual overhead costs.
  • Application of overhead estimates to actual production levels.
  • Analyzing budgeted and actual overhead costs for cost control.

Questions to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What is the difference between the standard cost and the actual cost of production?
  • Is it possible that a variance of one type might be partly or fully offset by another variance? Explain.

Resources

The following resources are required to complete the assessment.

Will email template

  • Wild, J. J., Shaw, K. W., & Chiappetta, B. (2011). Financial and managerial accounting: Information for decisions (4th ed.). New York, NY: McGraw-Hill.

Assessment Instructions

For this assessment, complete the following two parts:

Part 1: Use the Assessment 4 Template (linked in the Resources) to prepare a standard cost summary and related journal entries, based on a scenario provided in the template.

Part 2: Read each statement below (a through h). Then, write a 1–2-page analysis identifying what might cause these variances in a standard cost summary for materials, labor, and factory overhead. In addition, analyze, from a manager’s perspective, how each variance could be corrected and explain why.

  1. An unfavorable materials price variance.
  2. A favorable materials price variance.
  3. An unfavorable materials quantity variance.
  4. A favorable materials quantity variance.
  5. An unfavorable labor rate variance.
  6. A favorable labor rate variance.
  7. An unfavorable labor efficiency variance.
  8. A favorable labor efficiency variance.

Write your analysis in Microsoft Word. Use 12-point font, and double space. Follow APA style for citations and references.

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