12 - Standard Costing Flashcards
what does SC focus on?
comparing actual performance to the budget set at the beginning of the year
what are the purposes of SC?
- provide prediction of future costs for dec-mak
- assist in budget setting and perf eval
what is variance?
difference between standard and actual cost
what are the requirements for standard costs?
must be tough but attainable, to encourage good performance but not demotivate management
difference between standard costing and responsibility accounting?
SC does not take into account which factors mgmt can control, just calculates all variances
what is the top-down approach?
senior mgrs impose the standards on junior managers/employees
what is the participative approach?
lower mgmt play an active role in setting standards
when should the standard costs be incurred?
in the short term, efficient operating conditions, which allow for time-off and spoilage
which budget must be used for variance calcs?
flexed budget, standard components linked to actual production
what is the flexed budget variance?
difference between flexed budget and actual costs
how do we compare fixed costs / FOH?
actual (AQxAP)
static (SPxSQ)
allocated (SPxAQ)
(total variance = amount that must still be allocated to cost of production)
how should the variances of fixed costs / FOH look?
there should be no variances – FCs are not meant to change with volume
how do we calculate sales price variance?
AQ sold (ASP - SSP)
how do we calculate sales volume variance?
(standard GP or CM per unit)(AQ - SQ sold)
when do we use GP for sales volume variance?
when we have an absorption costing system
when do we use CM for sales volume variance?
when variable costing system
how are revenue and COS impacted by sales variance?
volume impacts both
price impacts revenue only
what can sales variances be further split into?
- market variances
- mix and yield variances
what is market share?
proportion of the total market that the company owns
what are the 3 components for market variances?
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
what does an increasing market size / share mean?
positive variance, sales will grow
how do we calculate actual market share (%)?
actual sales / market size
how do we calculate the market variances?
1-2 = share variance
2-3 = size variance
what does the mix variance look at?
how actual mix of inputs differs from standard mix
