12 - Standard Costing Flashcards

1
Q

what does SC focus on?

A

comparing actual performance to the budget set at the beginning of the year

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2
Q

what are the purposes of SC?

A
  • provide prediction of future costs for dec-mak
  • assist in budget setting and perf eval
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3
Q

what is variance?

A

difference between standard and actual cost

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4
Q

what are the requirements for standard costs?

A

must be tough but attainable, to encourage good performance but not demotivate management

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5
Q

difference between standard costing and responsibility accounting?

A

SC does not take into account which factors mgmt can control, just calculates all variances

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6
Q

what is the top-down approach?

A

senior mgrs impose the standards on junior managers/employees

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7
Q

what is the participative approach?

A

lower mgmt play an active role in setting standards

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8
Q

when should the standard costs be incurred?

A

in the short term, efficient operating conditions, which allow for time-off and spoilage

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9
Q

which budget must be used for variance calcs?

A

flexed budget, standard components linked to actual production

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10
Q

what is the flexed budget variance?

A

difference between flexed budget and actual costs

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11
Q

how do we compare fixed costs / FOH?

A

actual (AQxAP)
static (SPxSQ)
allocated (SPxAQ)
(total variance = amount that must still be allocated to cost of production)

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12
Q

how should the variances of fixed costs / FOH look?

A

there should be no variances – FCs are not meant to change with volume

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13
Q

how do we calculate sales price variance?

A

AQ sold (ASP - SSP)

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14
Q

how do we calculate sales volume variance?

A

(standard GP or CM per unit)(AQ - SQ sold)

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15
Q

when do we use GP for sales volume variance?

A

when we have an absorption costing system

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16
Q

when do we use CM for sales volume variance?

A

when variable costing system

17
Q

how are revenue and COS impacted by sales variance?

A

volume impacts both
price impacts revenue only

18
Q

what can sales variances be further split into?

A
  • market variances
  • mix and yield variances
19
Q

what is market share?

A

proportion of the total market that the company owns

20
Q

what are the 3 components for market variances?

A

1) actual sales (actual total market x %) = actual share
2) actual total market x standard % share = expected share
3) budgeted market sales (budgeted total market x %) = expected size

21
Q

what does an increasing market size / share mean?

A

positive variance, sales will grow

22
Q

how do we calculate actual market share (%)?

A

actual sales / market size

23
Q

how do we calculate the market variances?

A

1-2 = share variance
2-3 = size variance

24
Q

what does the mix variance look at?

A

how actual mix of inputs differs from standard mix

25
Q

what does yield variance look at?

A

the difference between actual outputs for a given level of inputs, compared to standard outputs

26
Q

how else can we calculate sales volume variance?

A
  • (share var)(GP per unit) + (size variance)(GP per unit)
  • mix + yield variance
27
Q

only when can we calculate mix/yield variances?

A
  • it is a process where it is possible to mix diff materials or labour
  • where resources are interchangeable and mgmt has the discretion to vary mix of inputs
  • resources are substitutes of one another
28
Q

which prices do we use when looking at volume (mix/yield variances)?

A

standard prices

29
Q

what are the three components of mix and yield variances?

A

1) AQ x AM
2) AQ x SM
3) SQ x SM

30
Q

when does IAS 2 say that inv can be measured at SC?

A
  • when the SC approximates the actual cost
  • when using absorption costing
31
Q

what kind of processes must we have to use SC?

A

repetitive processes

32
Q

how does each category of inv fit into the 3 var components?

A

AQ x AP = purchases
AQ x SP = RM
SQ x SP = WIP, FG, COS

33
Q

at what amount will o/b and c/b be at?

A

SQ x SP

34
Q

what is the COS equation?

A

o/b + Purchases + Production - c/b

35
Q

how to recon from budgeted profit to actual profit?

A

static net profit (rev - COS - FCs)
add: sales volume variance
standard profit at actual volume (flexed)
add: all other variances (VOH, FOH, DL, DM)
add: variances of NMOH
actual profit