Accounting. Standard Costs and the Balanced Scorecard
Chapter 10
Standard Costs and the Balanced Scorecard
Solutions to Questions
10-1 A quantity standard indicates how much of an input should be used to make a unit of output. A price standard indicates how much the input should cost.
10-2 Ideal standards assume perfection and do not allow for any inefficiency. Thus, ideal standards are rarely, if ever, attained. Practical standards can be attained by employees working at a reasonable, though efficient pace and allow for normal breaks and work interruptions.
10-3 Chronic inability to meet a standard is likely to be demoralizing and may result in decreased productivity.
10-4 A budget is usually expressed in terms of total dollars, whereas a standard is expressed on a per unit basis. A standard might be viewed as the budgeted cost for one unit.
10-5 A variance is the difference between what was planned or expected and what was actually accomplished. A standard cost system has at least two types of variances. A price variance focuses on the difference between the standard price and the actual price of an input. A quantity variance is concerned with the difference between the standard quantity of the input allowed for the actual output and the actual amount of the input used.
10-6 Under management by exception, managers focus their attention on results that deviate from expectations. It is assumed that results that meet expectations do not require investigation.
10-7 Separating an overall variance into a price variance and a quantity variance provides more information. Moreover, price and quantity variances are usually the responsibilities of different managers.
10-8 The materials price variance is usually the responsibility of the purchasing manager. The materials quantity and labor efficiency variances are usually the responsibility of production managers and supervisors.
10-9 The materials price variance can be computed either when materials are purchased or when they are placed into
Standard Costs and the Balanced Scorecard
Solutions to Questions
10-1 A quantity standard indicates how much of an input should be used to make a unit of output. A price standard indicates how much the input should cost.
10-2 Ideal standards assume perfection and do not allow for any inefficiency. Thus, ideal standards are rarely, if ever, attained. Practical standards can be attained by employees working at a reasonable, though efficient pace and allow for normal breaks and work interruptions.
10-3 Chronic inability to meet a standard is likely to be demoralizing and may result in decreased productivity.
10-4 A budget is usually expressed in terms of total dollars, whereas a standard is expressed on a per unit basis. A standard might be viewed as the budgeted cost for one unit.
10-5 A variance is the difference between what was planned or expected and what was actually accomplished. A standard cost system has at least two types of variances. A price variance focuses on the difference between the standard price and the actual price of an input. A quantity variance is concerned with the difference between the standard quantity of the input allowed for the actual output and the actual amount of the input used.
10-6 Under management by exception, managers focus their attention on results that deviate from expectations. It is assumed that results that meet expectations do not require investigation.
10-7 Separating an overall variance into a price variance and a quantity variance provides more information. Moreover, price and quantity variances are usually the responsibilities of different managers.
10-8 The materials price variance is usually the responsibility of the purchasing manager. The materials quantity and labor efficiency variances are usually the responsibility of production managers and supervisors.
10-9 The materials price variance can be computed either when materials are purchased or when they are placed into