CHAPTER 11
Standard Costs and Balanced Scorecard
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
B
Problems
1. Distinguish between a
standard and a budget.
1, 2
1
1
2. Identify the advantages
of standard costs.
3
1
3. Describe how companies
set standards.
4, 5, 6, 7,
8, 9
2, 3
1
1, 2, 3,
4, 17
4. State the formulas for
determining direct
materials and direct
labor variances.
10, 11
4, 5
2, 3
4, 5, 6, 7, 8,
9, 10, 13,
14, 19
1B, 2B, 3B,
4B, 5B, 6B
5. State the formula for
determining the total
manufacturing overhead
variance.
12
6
3
11, 12, 19
1B, 2B, 3B,
4B, 5B, 6B
6. Discuss the reporting
of variances.
13, 14
10, 14, 15
3B
7. Prepare an income
statement for management
under a standard costing
system.
18
16
2B, 5B, 6B
8. Describe the balanced
scorecard approach to
performance evaluation.
15, 16, 17
7
4
17
*9. Identify the features of a
standard cost accounting
system.
19
8, 9
18, 19, 20
6B
*10. Compute overhead
controllable and volume
variances.
20, 21,
22, 23
10, 11
21, 22, 23
7B, 8B,
9B, 10B
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Compute variances.
Simple
20–30
2A
Compute variances, and prepare income statement.
Simple
30–40
3A
Compute and identify significant variances.
Moderate
20–30
4A
Answer questions about variances.
Complex
30–0
5A
Compute variances, prepare an income statement, and
explain unfavorable variances.
Moderate
30–40
*6A
Journalize and post standard cost entries, and prepare
income statement.
Moderate
40–50
*7A
Compute overhead controllable and volume variances.
Simple
10–15
*8A
Compute overhead controllable and volume variances.
Simple
10–15
*9A
Compute overhead controllable and volume variances.
Moderate
10–15
*10A
Compute overhead controllable and volume variances.
Moderate
10–15
1B
Compute variances.
Simple
20–30
2B
Compute variances, and prepare income statement.
Simple
30–40
3B
Compute and identify significant variances.
Moderate
30–40
4B
Answer questions about variances.
Complex
30–40
5B
Compute variances, prepare an income statement, and
explain unfavorable variances.
Moderate
30–40
*6B
Journalize and post standard cost entries, and prepare
income statement.
Moderate
40–50
*7B
Compute overhead controllable and volume variances.
Simple
10–15
*8B
Compute overhead controllable and volume variances.
Simple
10–15
*9B
Compute overhead controllable and volume variances.
Moderate
10–15
*10B
Compute overhead controllable and volume variances.
Moderate
10–15
BLOOM’S TAXONOMY TABLE
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 11-3
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Distinguish between a
standard and a budget.
Q11-1
Q11-2
BE11-1
E11-1
2. Identify the advantages of
standard costs.
Q11-3
E11-1
3. Describe how companies
set standards.
Q11-8
Q11-4
Q11-5
Q11-6
Q11-7
Q11-9
BE11-2
BE11-3
DI11-1
E11-1
E11-2
E11-3
E11-4
E11-17
4. State the formulas for
determining direct
materials and direct
labor variances.
Q11-10
Q11-11
BE11-4
BE11-5
DI11-2
DI11-3
E11-4
E11-5
E11-6
E11-7
E11-9
E11-10
E11-13
E11-14
P11-1A
P11-2A
P11-5A
P11-6A
P11-1B
P11-2B
P11-5B
P11-6B
E11-8
E11-19
P11-3A
P11-4A
P11-3B
P11-4B
5. State the formula for
determining the total
manufacturing overhead
variance.
Q11-12
BE11-6
DI11-3
E11-11
E11-12
E11-19
P11-1A
P11-2A
P11-5A
P11-6A
P11-1B
P11-2B
P11-5B
P11-6B
E11-11
E11-12
E11-19
P11-3A
P11-4A
P11-3B
P11-4B
6. Discuss the reporting of
variances.
Q11-13
Q11-14
E11-10
E11-14
E11-15
P11-3A
P11-3B
7. Prepare an income statement
for management under a
standard costing system.
Q11-18
E11-16
P11-2A
P11-5A
P11-6A
P11-2B
P11-5B
P11-6B
8. Describe the balanced
scorecard approach to
performance evaluation.
Q11-15
Q11-16
Q11-17
DI11-4
BE11-7
E11-17
*9. Identify the features of a
standard cost accounting
system.
Q11-19
BE11-8
BE11-9
E11-18
E11-20
P11-6A
P11-6B
E11-19
*10. Compute overhead
controllable and
volume variances.
Q11-20
Q11-21
Q11-22
Q11-23
BE11-10
BE11-11
E11-21
E11-22
E11-23
P11-7A
P11-8A
P11-9A
P11-10A
P11-7B
P11-8B
P11-9B
P11-10B
E11-20
E11-21
E11-22
Broadening Your Perspective
BYP11-5
BYP11-7
BYP11-3
BYP11-1
BYP11-2
BYP11-4
BYP11-6
BYP11-8
BYP11-9
BYP11-10
ANSWERS TO QUESTIONS
1. (a) This is incorrect. Standard costs are predetermined unit costs.
environmental laws.
2. (a) Standards and budgets are similar in that both are predetermined costs and both contribute
application of manufacturing overhead to jobs and processes, budget data are not journalized
3. In addition to facilitating management planning, standard costs offer the following advantages to
an organization:
(4) They are useful in highlighting variances in “management by exception.”
4. The management accountant provides input to the setting of standards through the accumulation
5. Ideal standards represent optimum levels of performance under perfect operating conditions. Normal
conditions.
6. (a) The direct materials price standard should be based on the purchasing department’s best
storing, and handling.
(b) The direct materials quantity standard should be based on both quality and quantity requirements
7. Agree. The direct labor quantity standard should include allowances for rest periods, cleanup,
machine setup, and machine downtime.
8. With standard costs, the predetermined overhead rate is determined by dividing budgeted overhead
costs by an expected standard activity index.
9. A favorable cost variance has a positive connotation. It suggests efficiencies in incurring manufacturing
costs and in using direct materials, direct labor, and manufacturing overhead. An unfavorable
Questions Chapter 11 (Continued)
10. (a) (1) actual price. (2) standard price.
11. (1) – (3) = total labor variance; (1) – (2) = labor price variance; and (2) – (3) = labor quantity
variance.
12. Overhead applied = $9 X 27,000 = $243,000.
13. Variances should be reported to appropriate levels of management as soon as possible. The principle
14. The purchasing department would be responsible for an unfavorable materials price variance
15. The four perspectives of the balanced scorecard are: financial, customer, internal process, and
learning and growth. The financial perspective employs financial measures of performance used
efficiently. The learning and growth perspective evaluates how well the company develops and
retains its employees. The four perspectives are linked in that the results in one perspective
influence the results in the next.
16. Kerry James is not correct. The balanced scorecard does not replace financial measures, it
efforts.
17. The possibilities for nonfinancial measures are limitless. Some that were mentioned in the chapter
affecting customer product selection, number of patents and trademarks held, customer brand
credit card retention rates.
18. (a) Variances are reported in income statements for management below gross profit which is
reported at standard costs. Each variance is identified and the total variance is shown.
Questions Chapter 11 (Continued)
*19. (a) A standard cost accounting system is a double-entry system of accounting in which
(b) The variance account will have: (1) a debit balance when the materials price variance is
*20. Overhead controllable variance = actual overhead costs ($248,000) – overhead budgeted. Overhead
budgeted is based on standard hours allowed as follows: variable costs (27,000 X $5 = $135,000) +
*21. The purpose of computing the overhead volume variance is to determine whether plant facilities were
*22. Fixed costs remain the same at every level of activity within the relevant range. Since the prede–
*23. John should include the following points about overhead variances:
(1) Standard hours allowed are used in each of the variances.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 11-1
(a) Standards are stated as a per unit amount. Thus, the standards are
(b) Budgets are stated as a total amount. Thus, the budgeted costs for the
year are materials $1,300,000 and labor $1,700,000.
BRIEF EXERCISE 11-2
(a) Standard direct materials price per gallon = $2.60 ($2.30 + $.20 + $.10).
BRIEF EXERCISE 11-3
(a) Standard direct labor rate per hour = $15.00 ($13.00 + $.80 + $1.20).
BRIEF EXERCISE 11-4
Total materials variance = $1,192 U (3,200 X $5.06*) – (3,000** X $5.00).
BRIEF EXERCISE 11-5
Total labor variance = $680 U (2,100 X $10.80) – (2,000 X $11.00).
BRIEF EXERCISE 11-6
The formula is:
Actual
Overhead
$118,000
–
–
Overhead
Applied
*$122,400*
=
Total Overhead Variance
$4,400 F
*20,400 X $6 = $122,400
BRIEF EXERCISE 11-7
1.
2.
3.
4.
financial ………………………………..
customer ……………………………….
internal process …………………….
learning and growth ……………….
(c)
(d)
(a)
(b)
return on assets
brand recognition
plant capacity utilization
employee work days missed due
to injury
*BRIEF EXERCISE 11-8
(a) Raw Materials Inventory ……………………………………… 12,000
(b) Work in Process Inventory (5,800 X $2*) ………………. 11,600
*BRIEF EXERCISE 11-9
(a) Factory Labor …………………………………………………….. 25,500
(b) Work in Process Inventory (3,150 X $8.50*) ………….. 26,775
*BRIEF EXERCISE 11-10
The formula is:
Actual Overhead
$118,000
–
–
Overhead
Budgeted
*$131,600*
=
Overhead
Controllable Variance
$13,600 F
*(20,400 X $4) + $50,000 = $131,600
*BRIEF EXERCISE 11-11
The formula is:
Fixed
Overhead
Rate
X
(Normal Capacity Hours – Standard Hours Allowed)
=
Overhead
Volume
Variance
$2.00*/hr.
X
(25,000 – 20,400)
=
$9,200 U
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 11-1
Manufacturing Cost
Element
Standard Quantity
X
Standard Price
=
Standard
Direct materials
2 pounds
$ 5.00
$10.00
Direct labor
0.2 hours
15.00
Manufacturing overhead
0.2 hours
18.75*
Total
$16.75
DO IT! 11-2
The variances are:
Total materials variance = (29,000 X $6.30) – (32,000* X $6.00) = $9,300 favorable
*(16,000 X 2)
DO IT! 11-3
The variances are:
Total labor variance = (4,100 X $14.30) – (3,800* X $14.00) = $5,430 unfavorable
*2,000 X 1.9
**3,800 hours X $22.00
DO IT! 11-4
1.
Learning and growth perspective.
2.
Financial perspective.
3.
Customer perspective.
4.
Internal process perspective.
5.
Learning and growth perspective.
6.
Customer perspective.