金陵科技学院-管理会计（双语）Lecture 5.pptVIP

3. Direct Material Variances WHICH MPV OPTION TO CHOOSE? based on their circumstances. Control over the purchasing of materials is more critical for some firms (they would calculate MPV on purchase) than for others (where MPV on usage is adequate) 3. Direct Material Variances WHICH MPV OPTION TO CHOOSE? The firm isolates/calculates MPV at the earliest possible time (MPV on purchase) The firm records material purchases at standard price (MPV on purchase) The firm records material purchases at actual price (MPV on usage) The firm wants a high level of control over costs (MPV on purchase) The firm is not particularly concerned with a high level of control over purchases (MPV on usage) 2. Direct Labour Variances 2. Direct Labour Variances Table Format In the headings of the columns, one of the items will be constant across the two columns, the other will be different. It is the one that differs that you are measuring. Contents: Insert the data given in the three columns of the table below. For all variance calculations, you must show: Name of variance (abbreviation is suggested) Amount of variance Direction (F or U) of variance 2. Direct Labour Variances Table Format for ITB “Should have cost” ? for “actually used” ??Should have cost ? for ??should have used?? “actual cost” ? for “actually used” 2. Direct Labour Variances Formulae 2. Direct Labour Variances Journal Entries for DL employed and used Unfavourable cost variances DR Favourable cost variances CR 2. Direct Labour Variances Instead of debiting WIP and crediting Wages/Wages Payable (which is done for actual and normal costing systems), under standard costing the entries will include an entry into variance accounts. WIP DR 300,000 (debit with the standard cost of DL used, i.e. what DL should have cost for the units produced) LRV DR 8,250 (debit because the variance is unfavourable) LEV CR 3,000 (credit because the variance is favourable) Wages Salaries Payable CR 305,250 (