ACCA F5 题型归类--variance.doc

General standard costing1. outline the use of standard costing l standard costing is useful where there is a significant degree of repetition in the production process. This is because the standard costs are averages.l Valuation of inventories and costs of production for reporting purposesl Provide an excellent basis which enables costs to be monitored, reviewed and controlled by management l Enable the exception reporting through the use of variance analysis to control costs with a lower degree of effort and less time l Assisting in the budgeting processl Establish a good basis to evaluate managerial performancel Motivation of staff by setting demanding and achievable standards attainable standardsl Improving efficiency. Standard setting is often viewed as a way of understanding the detail of objectives and processes. If standards are an accurate reflection of a process, then they can be used to highlight ways of improving efficiency and act as signals when the process becomes inefficient. 【comparison corrective actions】 2. discuss the reasons why standars have to be reviewedl once standards have been set, they cannot be assumed to be accurate over long periods of time. standards have to be reviewed to enable the benefits of standard costing to continue.l For example, in environments which continuously seek greater efficiency and reduced costs of production, standards have to change to reflect such improvements.l In a fast-moving environment, standards can very quickly become out of date. l Moverover, other purposes of standards are undermined, if they are not continually reviewed: l The motivational impact of standardsl Assessment of managerial performancel Reporting proceduresl The credibility of standards in their role in assisting with the budget settingI Budget and Standards: standards can be used in these budgets - I Participation and imposed budgets; incremental budget; fixed budget; I Rolling budget,ZBB and ABB have different kind of standards 3. examine the impact of the operational changes on the profitability of the company l operational changes: improve the materials quality by changing the suppliers; increase the selling price; introduce more skilled labour; significantly reduce fixed overheadsl by maximising achievement, staff may be motivated to perform better with an asipirations budget 【difficult but credible】 l these changes may result in some adverse variances in short-term. Managers should be better off assessing performance in long run. 4. discuss the types of standard used in standard costing and their effect on employee motivationl the theory of motivation suggests that having a clearly defined target results in better performance . that targets need to be accepted by the staff involved and more demanding targets increase motivation provided they remain acceptedl basic standard: remains unchanged for a long period and is only used to show trends over time. it becomes increasingly easy to achieve. Be undemanding gradually, may have a negative impact on motivation. Standards that easy to achieve will give employees little to aim at. l ideal standard: represent the outcome that can be achieved under perfect operating conditions, with no inefficiencies at all. obviously, these conditions are unlikely to occur . ideal standards will be very demanding and are unlikely to be accepted as targets seem to be unachieved. Using it may have a negative effect on employee motivation. l current standard : based on current operating conditions and incorporate current levels of wastage, inefficiencies and machine breakdown. There is no improvement beyond its current level and their impact on motivation will be a netural one. l attainable standard : can be achieved by taking account of some wastage, inefficieny and machine breakdown. They are likely to be more demanding and have a positive effect on employee motivation. Since they are improved but still can be achieved. Variances1. explain the possible reasons for inter-relationships between A and B, or A/B/C I material price variance VS material usage varianceI material price variance VS labour efficiency varianceI material price variance VS material yield varianceI material mix variance VS material yield varianceI material price variance VS sales volume varianceI selling price variance VS sales volume variance I material usage variance VS labour efficiency varianceI labour rate variance VS labour efficiency varianceI labour efficiency variance VS variable overhead efficiency varianceI variable o/h expenditure variance VS variable o/h efficiency varianceI sales volume variance VS fixed o/h 2. state possible causes of an adverse/favorable X varianceI errors in standard setting: ignorance of learning effect; inaccurate information for standard settting; wrong prediction; poor budgeting; whether it is a new product or not 【new product always may result in some adverse material usage variance and labour efficiency variance; 】 I material price variance : negotiation; buy in bulk; change of suppliers; the flucturation of the market 【material shortage in the market】; change of the quality; I material usage variance : change of the quality; the change of the production process; wastage by the less skilled labour; spoilage due to less monitoring; I material mix variance : change of the production process;production managers own decision for a bonus; I material yield variance : change of the quality; change of the mix; change of the grade of labour; change of working practices; I labour rate variance : change of the grade of the labour; average change of the rate; I labour efficiency variance : change of the labour rate; change of the grade of labour; change of the machines; change of monitoring; training; I idle time variance : change of the machinesbreakdown; change of the labour grade; material capacity; change of production rate ( paide a fixed number of hours per week) I variable overhead expenditure variance : change of the rate; I variable overhead efficiency variance : change of the rate; change of labour grade; I fixed overhead expenditure variance: monitoring; change of the cost structure ; dysfunctional behaviours 【delay the payment of maintenance】I fixed overhead volume variance : a technical issue; change in demand or alterations to stockholding policy; changes of productivity due to labour grade or machines 【upgrade it】I fixed overhead efficiency variance : change of labour grade; I fixed overhead capacity variance : change in production volume due to demand/ production process/ machine/ labour grade; I selling price variance : I sales volume variance : price change; change of customers buying habits; competition【loss of market share】; shrinking of markets; change of production capacity 【efficiency; yield】; seasonal variation3. comment for management on each variance including variance trend 4. comment on the performance of A/B/C managers using the variances and other information and reach a conclusion as to wheather or not they have each performed wellI identify the variances that different managers may take responsibility of . sometimes, a single variance may be affected by decisions from several mangers. I comment in terms of the variances they achieved favorable and adverse; state the inter-relationships between these variances and possible causes of these variances; I comment in terms of other informationI reach a conclusion : calculate the total variances that under control of each manager and conclude their performance. 5. discuss factors to be considered in deciding whether a variance should be investigatedl size/ significance : large variances should be investigated as they above a given size. For example, a policy could be established to investigate all variances of 5% or more. l adverse or favorable: it is natural to concentrate on adverse variances in order to bring business operations back in line with targets. However, some favorable variances should be checked as well, since they may indicate the presence of budgetary salck. Or suggest ways in which the budgeting process could be improved to motivate . l cost versus benefits : if the expected cost of investigating a variance is likely to exceed any benefits expected to arise from its correction, it may be decided not to investigate. With a new product especially, all of the standards would need time to get right. A detailed investigation may prove uneconomic. l historical pattern of variances: an unusally variance compared to historical patterns of variances may be considered worthy of investigation. l reliability and quality of data : if the quality of measuring and recording system is not as high as would be liked, there may be uncertainty about the benefits to arise from investigation of variances.l cumulative variances over time : the size of the variance in each period may not, on its own, be sufficient to justify investigation, but the continuing trend might indicate an underlying cause for the variances that should be investigated. l reliability of budgeting 6. interpret A/B/C variances definition I take some examples !I material price variance : the acutal price paid for materials is different to standard. I material usage varianceI material mix variance: measure the impact of a change in material mix on profit. Maybe more cheaper materials are used in place of expensive one. I material yield variance : I labour rate varianceI labour efficiency varianceI selling price varianceI sales volume varince7. discuss the merits, or otherwise, of calculating the material mix and yield variancesl mix and yield variances are useful to sub-analyse the material usage variance when material inputs to a product can be varied. l It is common for mix and yield to be interrelated , and by analysing the variances, an optimal mix can be decided. 8. comment on the sales performance of the business after revision I divide it into sales price and volume to evaluate the performanceI sales price : competition; to boost a larger volume; new features of the product ; 【depend upon the pricing strategy 】; better negotiation with customers I sales volume : competition; market size; price change; new features of the product ; better sales staff ; I total variance: for example, the favorable volume variance is 3000, but the adverse selling price variance is 5000, thus, we may suggest that the lower of price may not be that well. 9. when budget revisions should be allowed or otherwisel a budget forms the basis of many performance management systems. Once set, it can be compared to the actual results of an organisation to assess performance. l A change to the budget can be allowed in some circumstances but these must be carefully controlled if abuse is to be preventedl Allowance : when something happened that is beyond the control of the organisation which renders the original budget inappropriate for use as a performance management tool【control; motivation; evaluation】. The adjustments should be approved by senior management who should take an objective and independent view. Not affected by the comment from the relevant managersl Disallowance : for operational issues. That within the operational control of a division l Overall, the decision whether to revise a budget is quite complexI State of the use of a budgetI Change of a budgetI Allowance and disallowance10. discuss the results of the planning and operational variancesI comment on the performances in terms of planning and opertional sidesI “once the budget is amended to reflect the new standard costs, acutal results can be compared to the new budget” “the revison is quite revealing”I Conclusion11. prepare X variance summaries for several months 12. prepare a summary financial statement showing the overall performance several periods data I work out