VE Gestión de Costos Luis Beltrán IUTECP

Main ideas, concepts, and lessons

1) Predetermined cost system & standard costing

• In a predetermined cost system, the course focuses on standard costing.
• Key principle: create a standard unit cost sheet for each cost object.
  • For companies with many products, this means a separate sheet for each product/cost object.

2) Structure of a standard unit cost sheet (method/process)

The instructor walks through preparing a standard unit cost sheet step by step:

Inputs provided by the exercise

• Projected production volume
• Direct materials requirements and pricing by quantity bands
• Direct labor requirements split by processes (with different bases: per ton vs per unit)
• Direct/indirect manufacturing overhead budgets (variable and fixed)
• Normal capacity / application base for overhead rates (often based on expected labor hours or another driver)

Outputs expected from students

• Compute and present:
  • Standard unit prices and quantities for direct materials
  • Standard labor rates and labor hours
  • Standard overhead application rates (variable and fixed)
  • Total standard cost per unit
  • Optionally: total standard cost for the year/volume

3) Example 1: from data to unit cost (tractor parts company)

The instructor explains the logic with one company example, then moves to a second homework-style case.

A. Direct materials standards

• Determine:
  • Quantity standard (per unit): given as 2 metric tons per unit
  • Unit price standard (per ton): derived from a price-per-ton tier based on annual order quantity
• Workflow:
  • Compute annual required tonnage:
    • If 30,000 units/year and 2 tons/unit → 60,000 tons/year
  • Find the price-per-ton based on the annual tonnage bracket:
    • 50,000 to 75,000 tons → 185 per ton
• Result:
  • Standard direct materials price = 185 per ton
  • Standard quantity = 2 tons per unit
  • Standard materials cost per unit = 2 × 185 = 370

B. Direct labor standards

Labor is split into two processes with different measurement bases:

• Molding: time is per ton
• Welding: time is per unit

Workflow

• Determine standard labor price (rates) from hourly data (e.g., molders 11, welders 15).
• Determine standard labor quantity (hours):
  • compute annual molding hours from tons
  • compute annual welding hours from units

Molding

• Molding time: 3 hours per ton
• Tons: 60,000
• Hours: 60,000 × 3 = 180,000 hours
• Cost: 180,000 × 11 = 1,980,000

Welding

• Welding time: 10 hours per unit
• Units: 30,000
• Hours: 30,000 × 10 = 300,000 hours
• Cost: 300,000 × 15 = 4,500,000

Total direct labor cost (exercise) ≈ 6,480,000

Efficiency / labor-hours standard per unit

• Molding hours per unit:
  • 2 tons/unit × 3 hours/ton = 6 hours
• Welding hours per unit:
  • given as 10 hours/unit
• Total labor hours per unit stated ≈ 16 hours per unit

C. Manufacturing overhead standards (indirect manufacturing costs)

Overhead includes:

• Variable indirect manufacturing overhead
• Fixed indirect manufacturing overhead

Overhead application rates

• The instructor uses total direct labor hours as the denominator.
• Denominator used:
  • 480,000 total direct labor hours

Workflow

• Variable overhead rate:
  • numerator: 120,000
  • denominator: 480,000 hours
  • rate ≈ 0.25 per direct labor hour
• Fixed overhead rate:
  • numerator: 57,600
  • denominator: 480,000 hours
  • rate ≈ 0.12 per direct labor hour

Conceptual note

• For fixed overhead, use normal production capacity (not expected actual capacity unless it matches normal capacity).
• Overhead budgets must align with budgeted production capacity.

4) Creating the final standard cost per unit

The instructor combines all standards:

• Direct materials per unit
  • 2 tons × 185 = 370
• Direct labor per unit
  • total labor hours per unit ≈ 16
  • standard labor cost per hour ≈ 13.50
  • labor cost per unit ≈ 16 × 13.50 = 216
• Indirect manufacturing overhead per unit
  • apply both fixed and variable overhead rates using the ~16 labor-hours per unit
  • subtotal components are shown in the subtitles

Final total standard cost per unit

• Approximately 591.92 (subtitle text is garbled, but the instructor concludes the unit total)

Total for the year

• unit standard cost × 30,000 units
• Approximately 17,757,600

5) Second homework example: company making beach shoes (“Fiji”)

Students must produce an additional sheet with the same format, but for a new case.

Cost object

• The cost object is a pair of shoes (not a single shoe).

Direct materials in the shoe example

Two direct materials:

1) Fabric/canvas - standard price: 2,700 bolivars per meter - standard quantity: 3/4 meter (later notes indicate potential subtitle conversion issues) - emphasis: convert units when price and quantity use different bases

2) Zippers/closures - standard price: 1 zipper = 1,800 bolivars - logic: a pair of shoes uses two zippers (one closure on each shoe) - standard quantity for the cost sheet (per pair): - 2 zippers × 1,800 bolivars each

Direct labor in the shoe example

Two labor processes:

1) Design & cutting - standard quantity: 3/4 hour per pair - standard price: 100 bolivars for that 3/4 hour - conversion not needed (exercise aligns inputs)

2) Sewing/manufacturing - standard quantity: 1 meter and 3 cubic feet per hour (as expressed) - standard price: 2,125 bolivars for the stated labor basis - instructor implies alignment, so conversion may not be needed

Indirect manufacturing overhead in the shoe example

• Overhead is computed for one month (May):
  • direct labor hours considered: 1 month
  • normal capacity for the month: 18 direct labor hours
• Method:
  • divide overhead budgets by 1,800 hours (based on the exercise’s implied denominator)
  • determine fixed and variable overhead application rates
• Instruction:
  • ensure Excel uses the correct overhead allocation driver (hours)

6) Excel submission requirements / instructor guidance

• Students must:
  • add an additional sheet using the standard unit cost sheet format
  • apply it to the shoe company case (Fiji)
  • adapt for multiple direct materials by adding/doubling cells/rows as needed
• Instructor clarification:
  • if the Excel view shown in class is missing elements (e.g., red/blue marks, questions), they will check and resend/notify.

7) Timeline and what comes next

• Submission deadline is extended by one week for late students.
• On Wednesday, the class covers:
  • standard cost variances (differences between standard vs. actual)
  • likely a separate Excel sheet for variances
  • students answer questions without entering/calculating in an accounting-style format
• Students can ask questions via the WhatsApp group.

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Detailed methodology / instruction-style bullet list (standard unit cost sheet)

A) Build a standard unit cost sheet (core steps)

• Step 1: Set the cost object
  • Prepare a sheet per product/pair of shoes, not a general company total.
• Step 2: Direct materials
  • Compute annual required quantity:
    • annual units to produce × direct material quantity per unit
  • Determine standard unit price:
    • use the provided tier table (e.g., price-per-ton or per-meter) based on annual/required quantity
  • Compute standard materials cost per unit:
    • standard quantity per unit × standard price per unit
  • If unit bases differ (e.g., price per meter but quantity in another unit):
    • convert quantity so units match
  • If multiple direct materials exist:
    • add each as separate line items and include all in total direct materials
• Step 3: Direct labor
  • Identify labor processes and their bases:
    • some time measures may be per ton, others per unit
  • Determine standard labor rate (price):
    • use hourly wage rates for the assigned labor category/process
  • Determine standard labor quantity (hours):
    • molding: tons × hours per ton
    • welding: units × hours per unit
  • Compute total direct labor cost, and (if required) derive standard labor cost per hour.
  • Compute standard labor hours per unit:
    • add hours from each process (e.g., ≈ 16 hours/unit)
• Step 4: Manufacturing overhead (indirect manufacturing costs)
  • Separate overhead into:
    • variable overhead budget
    • fixed overhead budget
  • Determine application base (driver):
    • exercise often uses direct labor hours (could be machine hours or units in other exercises)
  • Compute overhead application rates:
    • variable: variable overhead budget ÷ total expected application base
    • fixed: fixed overhead budget ÷ normal capacity application base
  • Apply overhead to unit:
    • overhead rate × standard hours (or driver per unit)
    • include both fixed and variable overhead
• Step 5: Total standard cost per unit
  • Sum: direct materials + direct labor + applied overhead
• Step 6: Total standard cost for the period
  • Multiply unit standard cost by expected production quantity for the period

B) Specific shoe homework formatting guidance (Excel)

• Use the same template/format as the earlier standard unit cost sheet.
• Update the company name to Fiji.
• Ensure the unit of output is pair of shoes (cost object).
• If multiple direct materials exist:
  • add extra cells/lines (e.g., fabric + zippers/closures).
• For zippers:
  • interpret “pair of shoes” as requiring 2 zippers total.
• For overhead:
  • compute/enter application rates using the exercise’s monthly timeframe (May) and the normal capacity hours.
• Upload the Excel output to the virtual classroom by the extended deadline.

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Speakers / sources featured (as mentioned in subtitles)

1. Professor Víctor Hugo Molina
   • Quoted for concepts such as responsibility areas for price standards and quantity standards, and meaning/definition of price standards.
2. The instructor/teacher
   • Leads the class, explains calculations, and assigns homework.
3. Students / classmates
   • Ask intermittent questions (e.g., about Excel visibility, clarification, and submission timing).
4. Polimeni and colleagues
   • Cited on the importance of sales budget and production budget for determining material quantities.