Capital Expenditure Alternatives
Once we have identified the need for capital expenditure, various project options have to be examined and evaluated to select the most cost-effective one. This…
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Accounting Rate of Return
This method of evaluating business investments considers the profitability of a project based on accrual accounting amounts found in the financial statements. The drawback of…
Payback period
The payback method is the simplest way of looking at one or more major project ideas. It tells you how long it will take to…
Net present value
The net present value method (NPV) of evaluating a major project allows you to consider the time value of money. Essentially, it helps you find…
Behavioral considerations in capital budgeting
Of the four methods of analyzing a major purchase, which one is the best? While the payback period method and the accounting rate of return…
Standard cost card
After standards have been set for materials, labor, and overhead, a standard cost card is prepared. The standard cost card indicates what the cost should…
Variable manufacturing overhead variances
The following data are for last month’s production: Number of suits completed (as before) 5,000 units Actual direct labor hours (as before) 10,500 hours Variable…
Direct labor variances
The following data are for last month’s production: Number of suits completed (as before) 5,000 units Cost of direct labor (10,500 hrs. @ $20) $210,000…
Direct material variances
To illustrate variance analysis, refer to the standard cost card for Speeds, Inc.’s jogging suit. The following data are for last month’s production: Number of…
The general variance model
The standard quantity allowed (standard hours allowed in the case of labor and overhead) is the amount of materials or labor that should have been…