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Knowledge of standard cost and variance analysis is an essential skill to assess and improve the efficiency and effectiveness of many organizations.

While the origins of standard costing are in manufacturing, it can be applied to any situation where there is an expected (standard) amount of materials and or labor, and the actual materials and labor can be identified and compared to the expected. Standard costing is used today in many industries, including distribution, health care and services.

This course explains how standard costs are developed for material, labor, and overhead, and their relationship with the budget. The course then explores contribution margin, how to use contribution margin to develop a flexible budget, and how to adapt the flexible budget for any level of output.

Techniques to analyze the differences between the budgeted and actual levels of sales are explored, followed by in-depth examination of the analysis of standard material and labor versus actual material and labor.

The course ends with a discussion of integrating indirect overhead costs into the standard cost of products and services, and how to assess the utilization of overhead costs based on the actual level of output.

The course content covers Performance Management topics tested in the Certified Management Accountant (CMA) Part 1 examination as outlined by the CMA Part 1 exam content specification outline.

Topics include:

  • Standard Costs
  • Introduction to Variance Analysis
  • Contribution Margin
  • Flexible Budgets
  • Sales Variances
  • Direct Material Variances
  • Direct Labor Variances
  • Overhead Variances

Course Key Concept: Standard costing, variance analysis, management by exception, contribution margin, static budget, master budget, direct material variances, direct labor variances, overhead variances, sales variances, flexible budgets.

Learning Objectives

  • Identify a standard cost system and identify the reasons for adopting a standard cost system.
  • Recognize how budget variance reporting is utilized in a management by exception (MBE) environment.
  • Explore and develop an understanding of contribution margin per unit and total contribution margin.
  • Identify and describe the benefits and limitations of measuring performance by comparing actual results to the static or master budget.
  • Explore how to prepare a flexible budget based on actual sales volume and calculate the flexible-budget variance by comparing actual results to the flexible budget.
  • Identify the purpose of sales variance analysis and the role of contribution margin in sales variances.
  • Discover how to develop sales variances.
  • Discover how to develop direct material and direct labor variances.
  • Discover how to develop overhead rates and variances, and the impact of indirect nature of overhead on analysis.
Last updated/reviewed: March 25, 2020

Prerequisites

Course Complexity: Intermediate

No advanced preparation or prerequisites are required for this course. 

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
Introduction And Overview
  2:46Course Overview
  9:36Introduction to Standard Costs and Variance Analysis
  7:30Introduction to Variance Analysis
  6:06Contribution Margin
  13:01Flexible Budgets
  16:51Sales Variances
  17:55Sales Mix and Quantity Variances
  17:32Direct Material Variances
  10:16Direct Labor Variances
  20:00Labor Rate and Efficiency Variances
  12:34Labor Mix and Yield Variances
  9:03Overhead Absorption
  6:10Variable Overhead Variances
  8:08Fixed Overhead Variances
Continuous Play
  2:37:30Standard Cost and Variance Analysis
Supporting Material
  PDFSlides: Standard Cost and Variance Analysis
  PDFStandard Cost and Variance Analysis Glossary/Index
Review And Test
  quizREVIEW QUESTIONS
 examFINAL EXAM