Budgeting and standard costing Chapter10 Budgeting and standard costing 皮欣然0132346 李宇琳0132378 潘悦 0132396

Topic List The use of standard costs Deriving standards Budgets and standards compared Flexible budgets The principle of controllability

Standard costs and standard cost card Standard cost is an estimated unit cost built up of standards for each cost element. （Standard cost=standard resource price *standard resource usage） standard cost card include budget materials cost，labour cost，overhead cost for a product.

The use of standard costing value inventory prepare cost budgets for production provide control information Standard costing as a control technique：difference between Standard and actual cost is know as a variance.The process by which the total difference between standard and actual results Is analysed in known as variance analysis.

The principle of controllability The principle of controllability is that managers of responsibility centres should only be held accountable for costs over which they have some influence.

Controllable costs Controllable costs are items of expenditure which can be directly influenced by a given manager within a given time span. A cost which is not controllable by a junior manager might be controllable by a senior manager A cost which is not controllable by a manager in one department may be controllable by a manager in another department.

The controllability of fixed costs Most variable costs are thought to be controllable in the short term,but it is often assumed that all fixed costs are non-controllable in the short run. Committed fixed costs（约束性固定成本） Discretionary fixed costs（选择性固定成本）

Topic List The use of standard costs Deriving standards Budgets and standards compared Flexible budgets The principle of controllability

2 Deriving standards The responsibility for deriving standard costs should be shared between managers able to provide the necessary information about levels of expected efficiency, prices and overhead costs.

Setting standards for materials cost Direct materials costs per unit of raw material will be estimated by the purchasing department from their knowledge of the following. Purchase contracts already agreed Pricing discussions with regular suppliers The forecast movement of prices in the market The availability of bulk purchase discounts The quality of material required by the production departments

Types of standard An ideal standard is a standard which can be attained under perfect operating conditions: no wastage, no inefficiencies, no idle time, no breakdowns An attainable standard is a standard which can be attained if production is carried out efficiently,machines are properly operated and/or materials are properly used. Some allowance is made for wastage and inefficiencies A current standard is standard based on current working conditions (current wastage, current inefficiencies) A basic standard is a long-term standard which remains unchanged over the years and is used to show trends

The impact on employee behaviour of the type of standard set Impact on behviour Ideal Incentive to be more efficient Attainable Incentive to work harder Current Current working conditions Basic Unfavourable impact on the motivation of employees

3 Budgets and standards compared A budget is an overall plan and a stand cost is a unit cost. Budgets and standards are similar in the following ways: (a) They both involve looking to the future and forecasting what is likely to happen given a certain set of circumstances. (b) They are both used for control purposes.

Important differences betweenBudgets and standards 模板来自于 http://docer.wps.cn Gives planned total aggregate cost for a function or cost centre; Can be prepared for all functions; Expressed in money terms; Shows the unit resource usage for a single task; Limited to situations where repetitive actions are performed and output can be measured; Need not be expressed in money terms;

Topic List The use of standard costs Deriving standards Budgets and standards compared Flexible budgets The principle of controllability

Flexible budgets Definition： A budget by recognising different cost behaviour patterns,changes with volume of activity changes. Fixed budget and flexible budget The connection with performance management

Fixed budgets and flexible budgets Useful at planning stage A common ground for preparation of many types of budget Flexible budgets: Budgetary control variance analysis Using to complement master budget at planning stage

The connection with performance management

The reason for causing difference in profit is the sales volume

Thanks! @WPS官方微博 @kingsoftwps Make Presentation much more fun