STANDARD COSTING Incorporating Standards

into the Accounting RecordsPertemuan 6 dan 7

Matakuliah : <<AKUNTANSI BIAYA II>>Tahun : <<2009>>

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LEARNING OBJECTIVE

Prepare general journal entries :•To record elements of cost at standard amounts•To record standard cost variances•To account for complete products at standard costs.•To dispose of standard cost variance

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Standard Cost Accounting for Materials

Purchase of Materials are recorded in one of three ways :1. The price variance is recorded when materials

are received and placed in stores. Example : Standard unit purchase price … $ 7.5 Purchase ………………………. 10,000 pieces at $ 7.44 Requisitioned …………………... 9,500 pieces SQ allow. for actual production .. 9.336 pieces

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Journal Entry for Method 1• Journal entry to record the purchase and material

issued:Materials ($7.5x10,000) $ 75,000

Account Payable ($7.44x10,000) 74, 400

Material Purchase Price Variance($0.06x10,000) 600. Work In Process ($7.5x9,336) $ 70,020 Materials Quantity Variance($7.5x164) 1,230 Material($7.5x9,500) 71,250

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Standard Cost Accounting for Materials

2. Materials are recorded at actual cost when received : the price variance is determined when the materials requisitioned for production.

3. A Combination of Method 1 and 2

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Journal Entry for Method 2• Journal entry when material are purchased : Materials ($7.44x 10,000) ………. $ 74,400 Account Payable ……………… $ 74,400• Journal entry when material issued : Work In Process ($7.5x9,336) $ 70,020 Materials Quantity Variance($7,5x164) 1,230 Materials ($7,44x9,500) $

70,680 Materials Price Usage Variance($0,06x9,500)

570

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Journal Entry for Method 3Journal entry to record the purchase :• Materials ($7.5x10,000) $ 75,000 Account Payable ($7.44x10,000) 74, 400

Material Purchase Price Variance($0.06x10,000) 600Journal entry when materials issued ( 2 journals). Work In Process ($7.5x9,336) $ 70,020 Materials Quantity Variance($7.5x164) 1,230 Material($7.5x9,500) 71,250

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Journal Entry for Method 3

• Journal entry when transfers $ 570 from the purchase price variance account to the price usage variance account.

• Material Purchased Price Variance($0.06x9,500) 570

Materials Price Usage Variable 570

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Standard Cost Accounting for Labor

• Payroll is computed based on clock cards, job tickets, and other information furnished to the payroll department.

• Example :• Actual Hours Worked ………………………….. 1,632• Actual Rate paid per hour ……………………… $ 12.50• Standard hours allowed for actual production .. 1,504• Standard rate per hour ………………………….. $ 12.00

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Standard Cost Accounting for Labor

• Journal entry records the total actual DLH payroll :• Payroll ($ 12.50x1,632) …………… $ 20,400• Accrued Payroll …………………. $ 20,400• Journal distributes payroll cost and recognize variances :• Work In Process ($12.00x1,504)…. $ 18,048• Labor Rate Variance ($0.50x1,632) 816• Labor Efficiency Variance ($12x128) 1,536 Payroll …………………………… $ 20,400

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Standard Cost Accounting for FOH• Actual FOH is measured not only against applied

overhead, but also against a budget based on actual activity and a budget based on standard

activity allowed for actual production.• Example :• Normal capacity in DLH 1,600

DLH• Total FOH at normal capacity : variable…………………… $ 4,800 fixed ……………………… 19,200 $ 24,000

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Example for FOH

• FOH rate per direct labor hour :• Variable …………………………. $ 3• Fixed …………………………….. 12 $ 15• Actual FOH …………………………. $ 24,442• Actual DLH …………………………. 1,632• Standard hours allowed for actual production 1,504

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Journal for FOH• Journal entry records actual FOH :• FOH Control ………………………. $ 24,442• Various Credit …………………. $ 24,442• Note : various credit = usage of indirect material,

indirect labor, and factory cost like acc. depreciation, prepaid insurance, prepaid rent and cash.

• Journal entry records applied FOH :• Work In Process ($15x1,504) ….. $ 22,560• Applied FOH …………………... $ 22,560

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Two-Variance Method

• The Balance in the FOH control account is divided between the controllable variance and the volume variance.

• Journal entry to close the FOH account :• FOH volume variance ($12x96 hours) $1,152• FOH controlled variance 710• FOH control ($24,422-$22,560) $

1,862

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Three-Variance Method

• The amount of over or under applied FOH is analyzed as spending, variable efficiency and volume variance.

• Journal entry to close FOH control: FOH volume variance ($12x60,000)…….. $ 1,152 FOH variable efficiency variance ……….. 384 FOH spending variance …………………. 326 FOH control …………………………… 1,862

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Disposition of Variance

• Variance can be disposed of in one of two ways :

• Variances treated as period expenses

• Variances allocated to Cost of Goods Sold and Ending Inventories

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CONCLUSION

• Standard Cost Accounting for Materials, Labor, and FOH

• Standard Cost Accounting for Complete Products

• Alternative FOH Methods• Disposition Variance