Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

Four reasons for using standard costs are 1

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15.5
Four reasons for using standard costs are
1
Cost management
2
Price making and pricing policy
3
Budgetary planning and control
4
Financial statement preparation.
15.6
Direct materials price variances are often calculated at the time of purchase, whereas direct materials efficiency variances are often calculated at the time of usage. Purchasing managers are typically responsible for price variances, whereas production managers are typically responsible for usage variances.
15.7
Cost of acquiring and using materials over and above purchase costs include
• Purchase order activities
• Inspection activities
• Material movement activities
• Supplier payment activities
• Materials carrying costs.
15.8
Budgeted costs can be successively reduced over consecutive time periods to incorporate continuous improvement. Chapter 15 uses the phrase continuous improvement standard costs to describe this approach
[AQ14]

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
15.9
An individual business function, such as production, is interdependent with other business functions. Factors outside production can explain why variances arise in the production area. For example
• Poor design of products and processes can lead to a sizeable number of defects.
• Marketing personnel making promises for delivery times that require a large number of rush orders that create production scheduling difficulties.
15.10
The plant supervisor has good grounds for complaint if the plant accountant puts excessive emphasis on using variances to pin the blame on. The key value of variances is to help understand why actual results differ from budgeted amounts and then use that knowledge to promote learning and continuous improvement.

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