8 Standard Costing

Question 1

What is the definition of standard cost?

Answer 1

This is the name given to an estimate of cost in advance

Question 2

What are the four different standards?

Answer 2

1. Basic Standard - assumes nothing has changed since the standard was first set
2. Current Standard - assumes current efficiency and cost levels will be maintained
3. Attainable standard - assumes that there will be some improvements in current efficiency and cost levels
4. Ideal Standard - optimum level of efficiency and cost and minimisation of waste

Question 3

What is a variance analysis?

Answer 3

This is where actual results are compared to the standard. The standard cost acts as a benchmark for comparison.

Question 4

What does a standard cost card show?

Answer 4

It shows the breakdown of all the costs associated with the making of a particular product

Question 5

What is piecework?

Answer 5

Piecework is where a rate of pay is established per unit of output. Rate normally worked out based on some expectation of a certain level of performance.

=> worker knows if they work more efficiently and quickly then they will earn money faster.