1. AMIS 212 Introductory Managerial Accounting
Chapter 10 Module 1
CHAPTER 1 MODULE 1
AMIS 212 Introductory Managerial Accounting
Professor Marc Smith

2. Chapter 10 Module 1: Standards
Standards are benchmarks or ‘norms’ for measuring performance. Two types of standards are commonly used.
Cost (price) standards specify how much should be paid for each unit of the input
(i.e., DM or DL).
Quantity standards specify how much of an input should be used to make a product or provide a service.

3. Chapter 10 Module 1: Standards
We will discuss standards for our variable
manufacturing costs:
1) Direct materials
2) Direct labor
3) Variable manufacturing overhead

4. Chapter 10 Module 1: Standard Cost Card
A standard cost card is a detailed listing of the standards that should go into making a unit of product.

5. Chapter 10 Module 1: Variances
The standards are compared against actual
results in order to evaluate the performance
of managers. The difference between the
actual results and standards is referred to
as a variance.
Any deviations from standard (i.e., variances) that are deemed significant are bought to the attention of management for further investigation.

6. Chapter 10 Module 1: Variance Analysis
Variance Analysis – A General Model
Price Variance
Difference between actual price and standard price
Quantity Variance
Difference between actual quantity and standard quantity

7. Chapter 10 Module 1: Variance Analysis
Price and quantity variances are determined separately for two reasons:
1) Different managers are usually responsible for
buying and for using the inputs. For example,
the purchasing managers is responsible for the
price paid to purchase direct materials whereas
the production manager is responsible for the
quantity of direct materials used to make goods.

8. Chapter 10 Module 1: Variance Analysis
Price and quantity variances are determined separately for two reasons:
2) The buying and using activities occur at different
points in time. For example, direct material
purchases may be held in inventory for a period
of time before being used in production.

9. Chapter 10 Module 1: Variance Analysis
In our class, there will be six variances we need
to be able to calculate and interpret:
A price (cost) and quantity variance for each:
1) Direct materials
2) Direct labor
3) Variable manufacturing overhead