Standard costing systems budget quantities and costs on a unit basis for all manufacturing costs. A standard
Question:
Standard costing systems budget quantities and costs on a unit basis for all manufacturing costs. A standard cost is a budgeted or expected cost per unit. Standards are set in advance and are developed in a number of ways: historical experience, engineering studies, and based on input from operating personnel who are familiar with the process. Because standard setting can be complex and expensive, once standards are set, they are rarely changed.
There are several types of standards. Select each standard type from the dropdowns with its definition.
Standards that change from year to year and emphasize continuous improvement. | - Select your answer -Currently attainableKaizenTheoreticalItem 1 |
Standards achieved under efficient operating conditions. | - Select your answer -Currently attainableKaizenTheoreticalItem 2 |
Ideal standards requiring maximum efficiency and ideal operating conditions. | - Select your answer -Currently attainableKaizenTheoreticalItem 3 |
As a result, standards that allow no machine breakdowns, or any type of inefficiency are ?- Select your answer -currently attainable standardstheoretical standardskaizen standardsItem 4 . Suppose a company had direct materials standard cost of $4.20 in year 1, $4.10 in year 2 and $3.95 in year 3 as waste and spoilage of materials in production was reduced. These standards would be ? - Select your answer -currently attainable standardstheoretical standardskaizen standardsItem 5 .
A standard cost card for one unit of a product may look like the following:
Direct materials (4 pounds @ $1.10 per pound) | $4.40 |
Direct labor (0.2 DLH @ $18 per hour) | 3.60 |
Variable overhead (0.2 DLH @ $2.10 per hour) | 0.42 |
Fixed overhead (0.2 DLH @ $5.00 per hour) | 1.00 |
Total cost per unit | $9.42 |
If required, round your answers to one decimal place.
The standard cost to produce one unit is $9.42. The standard cost to produce 760 units is $? . Of course, this is a simplification as the standard cost does not take fixed and variable costs into account. However, if the firm is producing at or near capacity, then the cost per unit of $9.42 could be multiplied by total units to get total standard cost.
The standard cost card gives both unit and cost standards. The direct materials total of $4.40 is based on the use of four pounds of material at $1.10 per pound. Similarly, it should take twelve minutes (0.2 direct labor hour) to produce one unit. This makes it easy to determine total quantities and cost would be for multiple units.
If 500 units were made, it should take pounds of direct materials with total standard cost of $ ?. If 540 units were made, it should take ? pounds of direct materials with total standard cost of $? . If 500 units were made, it should take ? direct labor hours with total standard cost of $ ?
Standard costing is used for planning, control and decision making. Consider the following scenarios:
1. | Abel Company has a standard cost of $5 per unit. Next year, Abel plans to make 20,000 units at a total manufacturing cost of $100,000. Abel is using standard costing in - Select your answer -planning control decision makingItem 13 . |
2. | Sanders Company has excess capacity and is considering a special order for 500 units at less than the usual price. In determining whether or not the company can accept the special order, Sanders calculates the standard variable cost per unit at $3. Sanders is using standard costing in - Select your answer -planningcontroldecision makingItem 14 . |
3. | Clooney Company has a standard cost of $8 per unit. Last month, Clooney made 150 units at the actual cost of $1,240, which Clooney compared to the total standard cost of $1,200. Clooney is using standard costing in - Select your answer -planning control decision makingItem 15 . |
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty