For some unknown reason which I cannot fathom my co-workers are far too dependant on me. Because one of them was having a hard time keeping up with her journal entries, and processing some billings for this past Friday, I was asked to ring New York to ask for an extension on doing journal entries; normally, we have four days to complete our journals, but she needed an extra day. What confuses me is why do I have to ring New York, why can’t my c-workers do it? I asked and the response was “you have a better rapport with them”.

Today, I’m trying to reconcile my intercompany and I can’t. Seems that one of our affiliates sent in cheques to pay off some IC balances. The Cash Clerk is sitting on the cheques because they were received on November 30th and the lockbox process would not have recorded them in the proper month. I was stunned for a minute, then asked her if she can still perform her cash applications process if the cheques are manually deposited (meaning that someone actually goes to a teller with a deposit slip). She said yes, she can do her cash applications – so my next question was, why didn’t you do it? My IC is now off by $18K with just one affiliate.

Another affiliate, I’m off by $120K because the creative twits are sitting on the invoicing and having them processed here in Finance.

$18K I can easily not worry about, since my threshold is $25K for providing explanations. But $120K I have to explain, and what will my explanation be? Creative is sitting on them? That isn’t an acceptable response for queries from our worldwide HQ in London.

Oh well, I have managed to reconcile 75% of my required balance sheet reconcilitions. I’m dreading the bank reconciliation, truly I am.

Thanks to the Financial Accounting Standards Board’s five-year effort to distill all of the existing accounting literature into a single database, the jumble of acronyms that make up generally accepted accounting principles (GAAP) has been edited down to a trio of letters.  Instead of FAS, FIN, SOP, and APB, there is now only ASC, or accounting standards codification.

David English, CFO at Ryan & Co., a tax-services firm, as begun transitioning to the new codification system as it applies to the private company’s year-end financials.  That means revising footnote references and watching for any changes to GAAP resulting from codification. 

While FASB has said that the project was not intended to change any principles, experts say the reorganization may have placed a new emphasis on some accounting rules that could, for example, make authoritative something in lower-level GAAP that was previously ambiguous.

The new system “makes perfect sense,” says English, but also imposes some additional cost.  While FASB does offer a free searchable online database of the new codification, English says the capabilities of that search function are “very, very limited,” making the $850-per-user “professional-view” option nearly a necessity.

Companies are taking a variety of approaches to how they cite accounting policies in their financial statements.  English plans to simply cite the new ASC references.  Some companies, such as Citigroup, have provided references to the old standards alongside the new codification references, although such guidance is not required.

Qualcomm, meanwhile, decided to use “plain English” in its latest financials, submitting a third-quarter filing that features nary a reference to a FAS or an ASC.

All of these approaches are valid, but one potential problem with the so-called plain English approach is that what passes for plain English can vary greatly from company to company.

This could pose a further obstacle to searching and comparing documents, says John Hepp, a partner at Grant Thornton.  Still, he predicts, the transition to the new codification system will soon be second nature.  “Within a year, people will be citing those ASC numbers as easily as they did the others.”

Leading insurance firm has an opportunity for a GAAP Reporting Manager in their Accounting Division. This is a very hands on position; on a day to day basis the position will see you responsible for:

Preparing timely and accurate US GAAP financial statements.

Ensuring accurate GAAP accounting has been consistently applied to the financial results of company.

Improving the internal controls around financial reporting by year end.

Position Requirements

Ten plus years of financial reporting experience is required.

Must have experience within the insurance sector, with good knowledge of STAT and US GAAP

An accounting degree is a must along with relevant insurance experience.

For a confidential discussion regarding this opportunity please contact WITH the job title of role you are interested in in Subject of email:

Sharon Greenberg

Origin Consulting LLC

The source of your solution

Email: sgreenberg@originconsulting.net

Director Consolidation Accounting

Leading Insurance firm is seeking a director level professional with strong consolidations experience for it global controllers team

As a Director in the Comptrollers department you will be responsible for the following:

-Manages day to day operations of the consolidation work stream:

Creates reconciliations between the firm and its parent Financials

Devises a reconciliation process for the firms accounts

Defines and process inter Business Unit eliminations

Responsible for testing and running of the Financial Consolidation Tool

Manages post close adjustments

Creation of the firms Consolidated Financial Statements

Develops policies and procedures

Develops Stat to GAAP reconciliations if necessary

-Manages the performance of the consolidations team.

-Liaises with key stakeholders in the Close and Consolidation and Finance Function in order to consolidate financials in a timely manner.

-Develops management reporting for the firm.

-Develops reporting for other Regulatory Requirements.

-Aids the transition from the current to a new consolidation system.

If you meet the qualifications, please forward your CV with salary history/requirements to:

Sharon Greenberg @ sgreenberg@originconsulting.net

If you meet the qualifications, please forward your CV with salary history/requirements to:

Sharon Greenberg @ sgreenberg@originconsulting.net

Accounting Policy

Do you have a public accounting background focusing on the insurance sector then or perhaps you have in-depth knowledge of US GAAP as it pertains to the insurance sector. The read on as this is a rare opportunity to join a new accounting policy function and utilize your in-depth technical accounting knowledge.

This position will support the objectives of the newly formed Accounting Policy Implementation Unit.

Your responsibilities will be:

Liaising with FGEN OAP and the parent company on issues and new accounting pronouncements (Examples include FAS 157, 160, 166/167)

Review of existing worldwide accounting treatment on select issues (Examples include FAS 52, Long vs. Short Duration contracts, Imputed Interest, Purchase GAAP accounting, Pensions)

Assist in writing reporting procedures in the form of formal bulletins for distribution to field offices and education of field offices in proper execution of bulletins.

Monitoring of accounting treatment on complex issues while in a remediation/implementation stage.

Coordination with Operations & Financial Reporting Groups to enhance required reporting through G/L’s and Consolidation Systems (i.e. Compshare/SAP)

Research into specific Statutory issues for purposes of determining appropriate treatment. This will include assistance in writing formal Statutory Position Papers/Bulletins to document conclusions reached.

Assistance in implementing specific procedures/strategies Statutory Issues (SSAP 97, SSAP 62, Non Admitted Assets)

Position Requirements

BS in Accounting required.

Five plus years experience in an audit and / or financial reporting environment for a large multinational corporation.

Strong verbal and written communication skills.

Insurance and public accounting background a plus.

Strange as it may seem like a financial concept, the term "bottom-line, there are only the last forty years or so around. It's Genesis as a word (an adjective, actually) was the result of the increasing need for the last create a benchmark for profitability in the period after World War II, business administration is advanced. profits for more than one company and income statement through a simple financial accounting. With the complexities introduced by a mechanized, large-scale, RobotThe global economy in the years 1950 and 1960, as well as a mandate from shareholders for more stringent (ie realistic) gains during this period, a new way to assess non-profit was born. It is said that the accounting of costs.

Cost and management accounting differs from financial accounting, if it is above all a more formal mechanism determined by the cost of the products or services and are monitored for effectiveness. This is achieved by collecting all costs of operation, thenClassified in a systematic way to determine their suitability as an expense. With this information, management can make decisions to eliminate inefficiencies in production costs and thus improve the bottom line, profits. Good cost accounting, not only helps to control costs, but can also help in a variety of production facilities. In this sense, the seven main objectives of cost accounting in manufacturing:

Determining the cost: Of course, the generalobjective of cost accounting is find out what your products and/or jobs cost you to make or provide.

Control: Improving efficiency by controlling and reducing costs. To control the budget through classification and analysis is to control the costs.

Information: Knowing raw material stock levels, the work in progress, and the amount of finished goods is information provided through cost accounting that can be used immediately by management.

Increasing Efficiencies: The efficiency of Each operation is really measured by the sum of its parts. How shall show the chaos, the inefficiency of a field at the end even for the failures in others. Brings an understanding of cost efficiency (or inefficiency) in all areas of manufacturing.

Determine the Asking: The detailed information provided as a good book, you can get a better price for your product and / or services between different variables (depending on the season, economic,Sales, etc.).

Operations Management: Where are your direct and be eaten in direct costs, and why? With accounting, you can adjust the operations of measures to enable them to improve the profitability of the job.

Financials: costs and benefits offers the opportunity for frequent reviews manufacturing costs, particularly as related to the performance of production in relative terms. Here, even routine, to help achieve continuous improvement in the cost of the reduction of costs.

AIn view of these seven goals at once is said that, as a simple financial accounting, however, provides the detailed work of a broader information base costs for operations management. The collection, classification and determination of costs through the accounts is therefore a means by which the efficiency will be discovered and implemented. To the extent that these implementations, a greater return on investment, and perhaps more of a dividend to shareholders, at a costOne can say that truly count on to help benefit the bottom line.

Leading insurance firm has an opportunity for a Project Manager in its Finance division.

As a Project Manager, your responsibilities will be:

Manage senior business analysts with all phases of Standard Development Life Cycle for Project Management (Business Requirements, System Requirements, integrated System Testing, User Acceptance Testing, Documentation and Post implementation Support) as it relates to Home Office Accounting Projects.

Manager Senior Business analysts involvement with overseas offices to guide local office as well as ensure all home office aspects of system updates are considered.

Understand and implement business strategy outlined by business sponsors.

Manage staff in reconciling financial discrepancies by collecting and analyzing information.

Maintain accounting controls by preparing and recommending policies and procedures as they relate to accounting projects at hand.

Answer project related questions by researching and interpreting how accounting policy and regulations affect the project.

Position Requirements

10 years or more of experience in accounting / business systems, preferably insurance related.

Five years or more of experience in Life Cycle project management.

College degree required.

If you meet the qualifications, please forward your CV with salary history/requirements to:

Sharon Greenberg @ sgreenberg@originconsulting.net

Origin Consulting is working with our clients to fill the following.  If you meet the qualifications, please forward your CV with salary history/requirements to:

Sharon Greenberg @ sgreenberg@originconsulting.net

1) Director of Corporate Accounting

As a Director in the Controllers department you will be responsible for the following:

Manage day to day corporate accounting operations:

Develop the firms Financial Reporting package

Identification of Corporate Only expenses

Manage the SAB 99 process for the firm

Processing of adjusting Journal Entries at the corporate level

Recording Corporate Journal Entries including expenses

Processing of JE for Corporate level expenses

Managing stock compensation

Manage the performance of the corporate team.

Liaise with key stakeholders in the Close and Consolidation and Finance Function of the firm.

Develops policies/procedures for corporate accounting.

Develops management reporting metrics at the corproate level.

Assess, review and reconcile accounting and differences.

Position Requirements

At least eight to ten years of related accounting exposure in the area of “Close” along with managerial experience. Experience in public company accounting desired.

Strong knowledge of Finance Process and Corporate Accounting.

Strong presentation and communication skills.

Ability to maintain strong relationship with senior management.

Bachelor’s degree required a Master’s and CPA designation preferred

Senior Tax Accountant – NYC

Our client, a leading New York City based Technology driven Financial Services firm seeks Senior Tax Accountant. Prepare various tax analyses, including quarterly tax estimates and state apportionment factors. Prepare supporting documentation required for preparation of tax returns, review tax returns and ensure tax documentation is accurately prepared for audit purposes. Manage transfer pricing study and annual review of the status. Lead implementation of FIN 48 and FAS 109. Research and review tax and compliance issues applicable in various domestic and international jurisdictions. Monitor ongoing correspondence and dealings with tax authorities regarding tax matters and audits. Manage regulatory compliance timetable to ensure timely submissions and efficient processing of sales and use tax, international VAT returns, and employment tax and regulatory filings. Advise management on complicated tax matters. Provide analytical support for special projects.Outstanding opportunity to join this dynamic industry leader.

Skills – 4-6 years related Tax experience. Strong knowledge of general tax principles. (CPA highly preferred). Excellent verbal, oral and written communication skills.

Please send resumes to pbank@kforce.com

Accounting Manager – NYC

A highly respected, well established New York City based Investment Management firm (Hedge Fund/Private Equity) seeks Accounting Manager. This newly created position will report to the Assistant Controller and be involved in various aspects of Financial Reporting, Consolidations and Analysis. This is a truly outstanding opportunity to join a very special firm and a great team. Extremely competitive benefits and advancement potential.

Skills – 5 to 8 years of high quality Public Accounting experience with Hedge Fund and/or Private Equity client base and several recent years working for a Hedge Fund or Private Equity firm. Exceptional technical Accounting and Communication Skills are essential. preferred.
Please send resumes to pbank@kforce.com

Can you please come tomorrow?

See, I am not like the others.

My love for you overflows especially when people’s hate for you is at its peak.

Not lately, though.   I don’t mind spending you running errands for the upstairs people.  At least it’s still you and you keep me occupied.

But then you leave and my day consists of multiple voids of nothingness.  Should I just leave too and use up my precious vacation hours?

Coz even if you come, and you know I have been waiting first in line, they still give you to another staff with a “CA” on his signature.

You know I hate bugging people to find you for me.  Why do they have to hire more people when there’s nothing left of you!?

So, dear work, please be there tomorrow.  Or else…..or else…I guess I’ll have 5 more extra days of CASB.  Fracking CASB, no one likes you but you come every effing week! Argh.

Are you starting a business?  Worried about how or what system you are going to run your business financial management? Worried about spending hundreds, if not thousands of dollars on a financial system you are not sure from the start if it is going to fit?

We suggest you have a look at Xero.

Xero is an internet based, hire by the month, easy to use financial system that can take care of all your basic financial system needs. It also has several “integrated” partner software offerings available on a similar basis for more advanced requirments such as Time & Cost billing, CRM, Payroll etc.

Definitely worth a look!

Hello again, folks!

Hope you’ve got some exciting plans for the upcoming Christmas holidays!  Hope you’re doing your best to avoid Santa’s naughty list!  And hopefully, Christmas shopping for those special ones in your life hasn’t stressed you to the point of pulling your hair out!

Hey!  Speaking of pulling your hair out….

Escape Artist Joyce Scarbrough has a new novel out entitled Symmetry!   Symmetry follows the story of Jessica Cassidy, a young woman who discovers that she may be suffering from a little known impulse control disorder known as trichotillomania, which can only be described as the repeated urge to pull out one’s own hair.  As distressing as this sounds, Joyce promises that hilarity ensues when Jessica stumbles across evidence that leads her to believe that her “beefcake” husband Lee has been less than faithful.  Lee tries to convince her that things are not what they seem, but she insists that Lee move out.  While Jessica is trying to decide whether or not to forgive him, things get worse (or maybe more hilarious?) when she bumps into Noah Hamilton, an old acquaintance with a charming sensitive side, the polar opposite of her husband Lee.  Sparks fly as the two men vie for Jessica’s affection, while Jessica is forced to deal with conflicting emotions…and a surprise visit from her mother…and trichotillomania!

You can order Symmetry on Amazon at:

http://www.amazon.com/Symmetry-Joyce-Sterling-Scarbrough/dp/1603181466/ref=sr_1_1?ie=UTF8&s=books&qid=1260136410&sr=1-1

Check it out today!  While you’re there, you might want to pick up a copy of Christmas Is A Season 2009, a collection of short Christmas-themed stories which includes an entry by Joyce!

http://www.amazon.com/Christmas-Season-Linda-Busby-Parker/dp/0982062915/ref=sr_1_1?ie=UTF8&s=books&qid=1260139491&sr=1-1

And hey!  If you haven’t already, why not pick up a copy of Christmas Is A Season 2008 which also includes an entry by Joyce.   (Just because it’s last year’s model doesn’t mean it’s outlived its usefulness.  Good stories never go out of style!)

http://www.amazon.com/Christmas-Season-Linda-Busby-Parker/dp/0982062907/ref=sr_1_1?ie=UTF8&s=books&qid=1260139759&sr=1-1

Buy Cheap Accounting Fundamentals for Health Care Management

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Accounting Fundamentals for Health Care Management is the ideal text for an introductory course in financial management in both undergraduate and graduate programs. As most courses focus on basic accounting, this is the first book that focuses on basic accounting. All example and applications in this book are specific to the field of health care. This book is an essential for anyone with a department and a budget……..
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 “Best accounting book” 2009-11-13
By A. Roddy (Montana)
When I first received the text, and saw how small it was, I couldn’t believe they had charged so much. Then I opened the book and began studying. What an easy read!! The authors do a great job of explaining health care accounting in an easy to understand manner. Their real life examples really hit their points home. By far the best accounting book I’ve ever had to study from.

 “Nice Resource for Nurse Managers” 2007-12-04
By Diane. B. (Georgia)

This is a well organized resource for nurse managers. I bought it for MSN classwork, but have decided to keep it for future reference at work. The text is organized well and provides a basic level of accounting understanding along with budgeting concepts.

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I am sure, that everyone of us was pondering already over the decision waht specialisation we should chose in the 4th semester, either marketing or accounting or finance. And I am persuaded, this is not that simple decision, because it will influence our potential career greatly.

I have come across an interesting fact recently: According to a recent article in Business Week, 90% of the CEO’s of the Fortune 500 companies come up through accounting. Another point worth mentioning: we also have to distinguish sharply between finance and accounting.  With finance, you’re dealing with future cash flows of a company (i.e. finding ways to make money, investing, etc.) while with accounting, you’re only dealing with past cash flows (i.e. audits, etc.). Finding ways to spend money is much more riskier/stressful than making sure your receipt is in order.But if we believe that knowledge of accounting leads to greater job opportunities compared to finance, we should not neglect the fact that accounting designation in North america means nothing in Asia. On the other hand,  there is a much bigger job market for accounting majors than there are Finance Majors.

Now let’t take a look at the Marketing Major. According to the opinions of many students and graduates, marketing is fun in university and then very sad when you graduate. You have to work EXTREMELY hard to get decent paying positions and many companies still regard their Marketing staff as glorified secretaries. One of our professors mentioned also, that most of the marketing personnel are working constantly under performance pressure from the side of CEO and under fight for extra resources with CFO of a company. Another professor mentioned, that it is not complicated to change to marketing having gained an experience in acconting, but it is impossible to succed the other way around.

Still, we have to know ourselves and our inclinations the perfectly in order to make a right decision and not suffer afterwards during the employment. It is rarely people reach success in career, if they are not passionate about the stuff they are doing. Either you are creative and have a talent to persuade people (pink shirt guys) or you are good at dealing with figures and are keen in analytical stuff (blue suit guys). What kind of person are you?

Hey,

Just wondering if there are any accounting students out there in the blogging world? I am attempting to begin an accounting blog here, with the hopes of making it as interesting as possible, which I understand might be a difficult task. But nonetheless I wish to fill this category with recent news and any other information that would be relevant to fellow accounting students. Feel free to get in touch, as I am always open to meeting new peeps, especially with the same major and interests.

Of course, income taxes are different than unemployment taxes and from the employer’s portion of the social security tax.  Those taxes are deductible.

Income taxes are held from your own income and need to be paid from your salary bucket inside your business.  If your paycheck says that you took home 700.00, then 300.00 is really taxes.  In t heory your paycheck should be 1,000.00 to cover taxes which is normally around 300.00 to be safe.  To be safe means you are not stuck with an enormous tax bill at the end of the year.

If you are a sole proprietor or a partnership then your taxes are paid from the guaranteed payments or from your owner’s draw.  This draw can take place through a physical check written from your business or through a bank transfer from your business account to your personal account.  It is then your responsibility to remit quarterly your income taxes and your social security taxes to the IRS and to the state agencies.  Those taxes are paid from the money that was transferred to your business account.  Some business gross up their partner’s draws and guaranteed payments to cove the cost of the taxes.  Instead of bringing home $1,000.00, they might bring home $1,300.00 to cover the taxes.

Please visit www.universityforbusiness.com for more information on how to help your small business grow.

Direct Materials Standards and Variance Analysis:

Standard price per unit of direct materials is the price that should be paid for a single unit of materials, including allowances for quality, quantity purchased, shipping, receiving, and other such costs, net of any discounts allowed.

Direct Materials Price and Quantity Standards:

Direct Materials Price Standards:

Standard price per unit of direct materials is the price that should be paid for a single unit of materials, including allowances for quality, quantity purchased, shipping, receiving, and other such costs, net of any discounts allowed.

Price standards for direct materials permit checking the performance of the purchasing department and the influence of various internal and external factors and measuring the effect of price increase or decrease on the company’s profits. Determining the price or cost to be used as the standard cost often difficult, because the prices used are controlled more by external factors than by company’s management. Prices selected should reflect current market prices and are generally used throughout the forthcoming fiscal period. If the actual price paid is more or less than the standard price, a price variance occurs. This is usually called direct materials price variance. Price increases or decreases occurring during the fiscal period are recorded in the materials price variance account(s). Price standards are revised at inventory dates or whenever there is a major change in the market price of any of the principle materials or parts

Standard price per unit for direct materials should reflect the final delivered cost of materials, net of any discounts taken. Allowances for freights and handling should also be taken into account.

Direct Materials Quantity Standards:

Standard quantity per unit of direct materials is the amount of direct materials or raw materials that should be required to complete a single unit of product, including allowances for normal waste, spoilage, rejects, and similar inefficiencies.

Quantity of usage standards are generally developed from materials specifications prepared by the department of engineering (mechanical, electrical, or chemical) or product design. In a small or medium sized company, the superintendent or even the foremen will state basic specifications regarding type, quantity, and quality of raw materials need and operations to be performed.

Quantity standards should be set after the most economical size, shape, and quality of the product and the results expected from the use of various kinds and grades of materials have been analyzed The standard quantity should be increased to include allowances for acceptable levels of waste, spoilage, shrinkage, seepage, evaporation, and leakage. The determination of spoilage or waste should be based on figures that prevail after the experimental and developmental stages of the product have been passed.

The standard quantity per unit for direct materials should reflect the amount of material required for each unit of finished product, as well as an allowance for unavoidable waste, spoilage, and other normal inefficiencies.

Direct Materials Price Variance:

Definition and Explanation of Direct Materials Price Variance:

Direct materials price variance is the difference between the actual purchase price and standard purchase price of materials. Direct materials price variance is calculated either at the time of purchase of direct materials or at the time when the direct materials are used. When this variance is computed at the time of purchase of materials it is called direct materials purchase price variance. When this variance is computed at the time of usage this is typically called direct materials price usage variance.

Direct materials price variance formula:

Following formula is used to calculate materials price variance:

[Materials Price Variance = (Actual quantity purchased × Actual
price) − (Actual quantity purchased × Standard price)]

This formula is usually preferred and used by managers because it permits calculation of materials purchase price variance very quickly.

Example:

Colonial Pewter Company provides the following information:

Standard price of material is $4.00 per pond and 6,500 pounds of materials have bee purchased at a cost of $3.80 per pound. This cost figure includes freight and handling and is net of quantity discount. All the materials purchased has been used and an output of 2000 units is produced during the period.

Required: Calculate materials price variance.

Calculation of direct materials price variance:

= (6,500 pounds × $3.80) − (6,500 pounds × $4.00)

= $24,700 − $26,000

= $1,300 Favorable

A favorable material price variance of $1,300 exists because the actual price of materials purchased is less than the standard price of materials purchased. A material price variance is called unfavorable materials price variance if the actual price of materials purchased is more than the standard price of materials purchased.

Variance analysis reports are often issued in a tabular format. An example of such a variance report follows along with an explanation for the materials price variance that has been calculated above for Colonial Pewter Company.

Most companies compute materials price variance when the materials are purchased than they are used in production. There are two reasons for this practice. First, delaying the computation of the price variance until the materials used would result in less timely variance report. Second, by computing the price variance when the materials are purchased, the materials are carried in the inventory accounts at their standard costs. This greatly simplifies book keeping. When the materials price variance is computed at the time of purchase of materials it is typically called materials purchase price variance.

Direct Material Quantity Variance

Definition and Explanation of Direct Material Quantity Variance:

Direct materials quantity variance is also known as Direct materials efficiency variance and Direct materials usage variance. It measures the difference between the quantity of materials used in production and the quantity that should have been used according to the standard that has been set. Although the variance is concerned with the physical usage of materials, it is generally stated in dollar terms to help gauge its importance.

Materials quantity | Usage variance Formula:

Following formula is used to calculate materials quantity variance or direct materials usage variance:

[Materials
quantity variance = (Actual quantity used × Standard price) − (Standard quantity allowed ×
Standard Price)]

Example:

Colonial Pewter Company provides the following data:

3.0 pounds of materials are required to produce a unit of product according to standards set by the management. The standard price of direct materials is $4.00 per pound. During the period 2000 unit were completed with an actual consumption of 6,500 pounds of direct materials.

Calculate direct materials quantity variance or direct materials usage variance.

According to above information, the calculation of materials quantity variance is as follows:

Calculation of Materials Quantity Variance = (Actual quantity used × Standard price) − (Standard quantity allowed × Standard price)

=(6,500 pounds × $4.00) − (6,000* pounds × $4.00)

= $26,000 − $24,000

= 2000 Unfavorable

*Standard quantity allowed (3.00 per unit × 2,000 units)

Above calculation shows an unfavorable direct materials quantity variance. When materials are used more than what is allowed by standard an unfavorable quantity variance occurs. If materials used is less than the quantity allowed a favorable direct materials quantity variance occurs.

Standard costing is an important subtopic of cost accounting. Standard costs are usually associated with a manufacturing company’s costs of direct material, direct labor, and manufacturing overhead.

Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, many manufacturers assign the expected or standard cost. This means that a manufacturer’s inventories and cost of goods sold will begin with amounts reflecting the standard costs, not the actual costs, of a product. Manufacturers, of course, still have to pay the actual costs. As a result there are almost always differences between the actual costs and the standard costs, and those differences are known as variances.

Standard costing and the related variances is a valuable management tool. If a variance arises, management becomes aware that manufacturing costs have differed from the standard (planned, expected) costs.

• If actual costs are greater than standard costs the variance is unfavorable. An unfavorable variance tells management that if everything else stays constant the company’s actual profit will be less than planned.
• If actual costs are less than standard costs the variance is favorable. A favorable variance tells management that if everything else stays constant the actual profit will likely exceed the planned profit.

The sooner that the accounting system reports a variance, the sooner that management can direct its attention to the difference from the planned amounts.

If we assume that a company uses the perpetual inventory system and that it carries all of its inventory accounts at standard cost (including Direct Materials Inventory or Stores), then the standard cost of a finished product is the sum of the standard costs of the inputs:

1. Direct material
2. Direct labor
3. Manufacturing overhead
a. Variable manufacturing overhead
b. Fixed manufacturing overhead

Usually there will be two variances computed for each input: