MALİYET VE YÖNETİM MUHASEBESİ - Deneme Sınavı - 2

Direct Price Variance = (45-42) x (30.000) =90.000 is the total variance on purchases.

The investment control consisting order point and the economic order quantity. Order point is an important issue for inventory policies. Over investment in materials yields to unproductivity so as lack of materials for production have the same effect on the company.

In a budgetary control system, the standards are set, at first. These standards represent what it should cost the company to produce one unit of finished goods. Then, the standards are multiplied with the production volume to determine the total budgeted production cost for the upcoming period. When the period ends, the actual production cost is measured and deviations from the budgeted costs are determined. Standard cost is the cost determined by careful analyses that states how much something cost to the company under normal conditions.

The difference between the actual results and budgeted amounts is called “variance”. The amount of variation also depends on the standards as the benchmark point. For providing the variances tell the true story, standards must also be determined correctly. If the targets are mistaken, even if the operations are effective, they will seem to need corrections. Therefore, the effectiveness of the controlling process depends partially on the effectiveness of standard setting.

Classification According to the Level of Difficulty: Standards are classified as “ideal (perfection; theoretical) standards” and “currently achievable (practical; attainable) standards” according to the difficulty in attaining the standards. Ideal standards reflect the peak operating efficiency without any production disruptions.

Use of standard costing makes it easier to compare the actual results with budgeted results, by providing the opportunity to determine a new target that is adjusted for the actual output level, instead of a fixed level of production. Considering the size of variations from target results, managers may spend their time on significant problems rather than wasting for insignificant ones. These variances also provide benchmark points for the managers to evaluate the performance. As a result of the evaluations, employees may be punished or rewarded; both motivate them to meet the standards.

The standard cost for direct materials has three facets as quality, quantity, and price. The first step is to specify the desired quality of direct materials. The quality of direct materials determines the quality of the product and changes the production schedules to some extent. Because, the amount of direct materials needed for desired production level, time to process and complete the production, needed extent and frequency of supervision, and the purchase price are all affected by the quality of direct materials.

The financial dimension of control is provided by comparing the budgeted numbers with actual results. The budgeted numbers represent the standard amounts that signal the targets to reach and provides benchmark points for the company to evaluate the performance. In this frame, budgets are important tools for financial control. By comparing the actual results with the budgeted targets, the deviations (variances) are calculated. Considering the amounts and directions of variances (either favorable or unfavorable) management takes actions either to keep the ongoing processes or correct the inefficient operations.

The master budget is useful for planning and coordination purposes; however, its static nature limits its usefulness for performance evaluation. Operating conditions usually do not match the conditions that management expects or forecasts at the time budgets are prepared. In order to evaluate the short-term financial performance, companies at first revise the static budgets for the actual sales volume and this newly created budget is called “flexible budget”.

The Sales-Volume Variance explains the difference as a result of selling at different volumes. The calculation of Sales-Volume Variance for sales revenue is as follows:
Sales-volume variance = (Actual sales volume - Budgeted sales volume) x Budgeted selling price

DM Price Variance = (T27 - T25) x (30,000) =T60,000 (U) is the total variance on purchases.

Direct labor price variance = (11 - 10) x 49,400 = 49,400tl (U)

Standard cost is the cost determined by careful
analyses that states how much something cost to the
company under normal conditions.

The difference between the actual results and budgeted amounts is called “variance”.

Generally, managers use two methods for setting the cost standards: historical data analysis and task analysis.

There are several types of standards that can be classified from different perspectives, such as:
a. the level of difficulty,
b. updating frequency,
c. subject of standards, and
d. level of participation to the standard-setting process.

Classification According to the Level of Difficulty: Standards are classified as “ideal (perfection; theoretical) standards” and “currently achievable (practical; attainable) standards” according to the difficulty in attaining the standards.

Classification According to Updating Frequency: The two contrast types of
standards are “fixed standards” and “kaizen (continuous-improvement) standards”.

Flexible budget is the budget that adjusts the revenues and expenses according to actual sales volume.

Materials usage ratio is the ratio that represents the relationship between the quantity used and the quantity purchased.