Chapter 25 - Standard costs and balanced scorecard. In this chapter, the learning objectives are: Distinguish between a standard and a budget, identify the advantages of standard costs, describe how companies set standards, state the formulas for determining direct materials and direct labor variances. | Learning Objectives Describe standard costs. 1 Determine direct materials variances. 2 Determine direct labor and total manufacturing variances. 3 Prepare variance reports and balanced scorecard. 4 Standard Costs and Balanced Scorecard 25 Both standards and budgets are predetermined costs, and both contribute to management planning and control. There is a difference: A standard is a unit amount. A budget is a total amount. Distinguishing Between Standards and Budgets LEARNING OBJECTIVE Describe standard costs. 1 LO 1 Illustration 25-1 Advantages LO 1 Setting standard costs requires input from all persons who have responsibility for costs and quantities. Standards should change whenever managers determine that the existing standard is not a good measure of performance. Setting Standard Costs LO 1 IDEAL VERSUS NORMAL STANDARDS Companies set standards at one of two levels: Ideal standards represent optimum levels of performance under perfect operating conditions. Normal standards represent efficient levels of performance that are attainable under expected operating conditions. Properly set, normal standards should be rigorous but attainable. Setting Standard Costs LO 1 Most companies that use standards set them at a(n): optimum level. ideal level. normal level. practical level. Setting Standard Costs Question LO 1 How Do Standards Help a Business? A number of organizations, including corporations, consultants, and governmental agencies, share information regarding performance standards in an effort to create a standard set of measures for thousands of business processes. The group, referred to as the Open Standards Benchmarking Collaborative, includes IBM, Procter and Gamble, the . Navy, and the World Bank. Companies that are interested in participating can go to the group’s website and enter their information. Source: Becky Partida, “Benchmark Your Manufacturing Performance,” Control Engineering (February 4, 2013). Accounting Across the Organization Navy LO 1 A . | Learning Objectives Describe standard costs. 1 Determine direct materials variances. 2 Determine direct labor and total manufacturing variances. 3 Prepare variance reports and balanced scorecard. 4 Standard Costs and Balanced Scorecard 25 Both standards and budgets are predetermined costs, and both contribute to management planning and control. There is a difference: A standard is a unit amount. A budget is a total amount. Distinguishing Between Standards and Budgets LEARNING OBJECTIVE Describe standard costs. 1 LO 1 Illustration 25-1 Advantages LO 1 Setting standard costs requires input from all persons who have responsibility for costs and quantities. Standards should change whenever managers determine that the existing standard is not a good measure of performance. Setting Standard Costs LO 1 IDEAL VERSUS NORMAL STANDARDS Companies set standards at one of two levels: Ideal standards represent optimum levels of performance under perfect operating conditions. Normal standards .
