Performance Measures
Chapter 11
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Standard Costs
Standards are benchmarks or “norms” for
measuring performance. In managerial accounting,
two types of standards are commonly used.
Standard
Amount
Direct
Material
Direct Manufacturing
Labor Overhead
Take
Identify Receive corrective
questions explanations actions
Conduct next
Analyze period’s
variances operations
Prepare standard
Begin
cost performance
report
11-4
Setting Standard Costs
Should we use I recommend using practical
ideal standards that standards that are currently
require employees to attainable with reasonable
work at 100 percent and efficient effort.
peak efficiency?
Price Quantity
Standards Standards
11-6
Setting Direct Labor Standards
Rate Time
Standards Standards
11-7
Setting Variable Manufacturing Overhead
Standards
Rate Quantity
Standards Standards
11-8
Price and Quantity Standards
Price and quantity standards are
determined separately for two reasons:
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A General Model for Variance Analysis
Variance Analysis
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A General Model for Variance Analysis
Variance Analysis
11-11
A General Model for Variance Analysis
11-12
A General Model for Variance Analysis
11-13
A General Model for Variance Analysis
11-14
A General Model for Variance Analysis
11-15
A General Model for Variance Analysis
11-16
A General Model for Variance Analysis
11-17
Responsibility for Material Variances
11-18
Responsibility for Labor Variances
Quality of production
supervision.
Quality of training
provided to employees.
Production Manager
11-19
Advantages of Standard Costs
Advantages
Enhances
Simplified responsibility
bookkeeping accounting
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Potential Problems with Standard Costs
Emphasizing standards Favorable
may exclude other variances may
important objectives. be misinterpreted.
Potential
Problems
Standard cost Emphasis on
reports may negative may
not be timely. impact morale.
Throughput Time
11-22
Delivery Performance Measures
Order Production Goods
Received Started Shipped
Throughput Time
11-23
End of Chapter 11
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