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Journal Entries, Cost Variances, And Reports. Learning Objectives. After studying this chapter, you should be able to: 1. Discuss the role of a standard cost accounting system (SCAS) in responsibility accounting. Explain the meaning of a cost variance, and calculate and interpret the variable costs' spending variances. Calculate and interpret the variable costs' usage variances. Calculate and interpret the fixed overhead variances. Prepare the journal entries for an SCAS, and the cost variance report. Design a high- quality SCAS with management reports useful for operational control and performance evaluation. Prepare a list of attributes needed in a relational database to prepare Standard Cost reports in an REA environment. Introduction. Chapters 4, 5, and 6 presented actual and normal JOCASs and PCASs. These cost accounting systems are mainly based on actual costs. By themselves, however, actual costs are not particularly useful to management in controlling daily operations and evaluating performance. For these decision- making needs, actual costs should be compared against standard costs. The standard costs, prices, and quantities and the standard manufacturing cost equation reside in the SCAS LAN database. This information is accessed by the production LAN's MRP II system as needed in shop floor operational planning and control. The SCAS also includes a report generator that, in world- class enterprises, can provide real- time cost variance information as well as summary reports. In this way, the SCAS can provide high- quality information for its cost management objective. In addition, standard costs can be used in the SCAS journal entries to represent the product's cost in WIP, FGI, and COGS. Some enterprises use standard costs and cost variances strictly as planning, controlling, and evaluating techniques. Cost variance information is available within the JOCAS or PCAS LAN, but actual costs are used in the journal entries. An example of a JOCAS that reported cost variances was discussed in Chapter 5 (see Exhibit 5- 2. ![]() ![]() Other companies enter standard costs in the general ledger accounts and journalize cost variances. As explained in the last chapter, when actual costs and standard costs differ, the difference is a cost variance. A cost variance can be either favorable or unfavorable. A favorable cost variance results when actual costs are less than standard costs. An unfavorable cost variance occurs when actual costs are greater than standard costs. ![]() Although variances are excellent devices for gauging economic and operating performance, management accountants must take care to ensure that they are used properly and do not cause counterproductive behavior. Cost Variance Reporting, Responsibility Accounting, And Motivation. LEARNING OBJECTIVE 1. WatersTechnology is the leading financial market technology information provider and the home of Inside Market Data, Inside Reference Data, Buy-Side Technology & Sell. Top VIdeos. Warning: Invalid argument supplied for foreach() in /srv/users/serverpilot/apps/jujaitaly/public/index.php on line 447.
Discuss the role of a standard cost accounting system (SCAS) in responsibility accounting. A standard cost developed jointly by management and employees responsible for the costs can be a motivating influence for employees and result in higher productivity. Generally, people are more motivated to do a good job if they clearly understand what is expected of them and believe they will be rewarded for their efforts. Using cost variances as fault- finding devices and placing too much reliance on them in evaluations may, however, motivate people to engage in counterproductive acts such as delayed maintenance, bickering over cost allocations, or even falsifying data. Indeed, most people's needs are too diverse and changeable to be satisfied by a single evaluation criterion, such as a cost variance. Rewards for learning additional skills, reducing spoilage, increasing equipment uptime, and suggesting successful improvements, to name just a few, are part of the evaluation- reward- motivation systems of many world- class enterprises. Cost management, through control of shop floor activities, is an important component in a firm's success and profitability. In assigning responsibility to the individuals in a position to exercise control over those costs, shop floor employees become cost- conscious as they become aware of results. The cost- consciousness tends to reduce costs and encourage improvement in performance in all activities of the organization. The SCAS, however, should not be used as an excuse to conduct “witch hunts.” The focus should be on supporting the production process by helping workers solve problems and achieve the standards they participated in setting. Spending too much time investigating previous period cost variances and blaming people can often bring about results contrary to those intended. Ideal And Practical Standards. In describing the SCAS's role as a responsibility accounting system, it is important first to consider how the standards are set. Because standards are goals that are used to judge actual performance, a key question is, “Just how demanding should standards be?” Should they assume theoretical perfection, or should they assume various factors that prevent perfect performance? Standards can be based on ideal or practical operating conditions. For example, a small unfavorable variance implies very good performance if ideal standards are set, while the same variance implies average performance, at best, if practical standards are used. A small unfavorable variance from an ideal standard may not lead to further investigation, whereas the same variance based on practical standards may lead to investigation and corrective action. Ideal standards are set as goals toward which employees work for continuous improvement, a concept of world- class manufacturing. Variances from these standards will probably always be unfavorable, but continuous improvement will result in the variances becoming smaller over time. Thus, the SCAS, when using ideal standards, will have to output trend analysis reports, often in graphic form. By showing the reduction in cost variances over time (i. Practical standards are tight but achievable. They do not tolerate abnormal waste and lost time, although they allow for normal machine downtime, employee rest periods, and the like. Both favorable and unfavorable variances result from the use of these standards. Generally, they have been considered to be most useful in determining how effectively and efficiently present operations are being carried out. These standards can be met or surpassed by actual performance, but only if high efficiency is achieved. They are indeed within the achievable range of most employees, yet difficult enough that employees feel as though they have accomplished something of value when the standards are attained. Employees are motivated by practical standards, especially if they've had input into their development, and will normally put forth their best efforts to achieve them. If management is trying to compete against world- class enterprises, however, cost variances from practical standards may not provide the kind of performance information the firm needs. Enterprises using standards that typically ignore continuous improvement and have avoidable inefficiencies built in will not be able to compete against world- class enterprises that are continually striving to eliminate waste and inefficiencies of all kinds. The best standard for today's competitive environment is one that seeks to improve future performance. Long- run continuous improvement is measured by the movement toward ideal standards. When ideal standards are used to calculate cost variances, the reduction in cost variances over time signals this improvement. An enterprise that uses practical standards also needs long- range graphical trend analysis of the change in standards. The difference between ideal and practical standards is the long- run continuous improvement goal. Thus, this difference should be decreasing over time. Managing By Exception. The use of standard costs makes possible the concept of management- by- exception. In traditional and world- class, manufacturing and nonmanufacturing, profit and nonprofit enterprises, the most important scarce resource is time. Computers are used for managing by exception and tracking cost variances. This is especially true in JITs that need to respond quickly to changing custom needs and production problems that can lead to jidoka (defined in Chapter 2). Thus, shop floor personnel must be able to distinguish between variances that can be ignored and those that should be investigated. To make this distinction, managers set upper and lower limits of acceptable variances from standard. ![]() DMX 2. 0 - sold at ADJi want to know if your sofware for the my dmx. D view,add i have a ligth of big dipper like lp. The 3. D Visualizer is in Beta Test Mode: https: //www. AABOBn. ZAw. X1yozho. ZYDZSVMna? dl=0. Try this link. As for the Fixture info you will ned to contact our service Dept to generate a profile for you. Contact Ernies@americandj. I recently purchased my. 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The plan to release modified mosquitoes in the Keys attracted much local ire—after initially getting the greenlight from the FDA, the project was ultimately stalled by a local vote and forced to find a new location for a trial. In upstate New York, too, the moths have stirred up a debate over GMOs for the past several years, though the plan has not been met with quite the same level of opposition. The approval process through the USDA rather than the FDA, too, was much swifter. In laboratory and greenhouse trials, the modified mosquito was reportedly effective in decreasing the overall population. But tests still need to determine how it will fare in open air. Oxitec has released its engineered mosquitoes Brazil, Grand Cayman, and Panama, and still plans to go ahead with a field trial in the Keys. In December, the company announced plans for field trials of a genetically modified Mediterranean fruit fly in Western Australia. 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