Actual Vs Standard Cost Chapter 10 Flashcards
What are potential savings?
The difference between actual costs and standard costs
Potential savings can be recorded as dollars, percentages of sales, or both.
How is actual cost percent for any given day calculated?
Actual cost for that day / sales for that day
What does standard cost refer to?
The agreed-upon cost of goods or services used to measure other costs
What is the definition of standard portion cost?
The amount that a standard portion should cost, given the standards and procedures for its production
What do unfavorable variances indicate?
Unfavorable means that the actual cost is more than the standard cost
Waste or inefficiency of some sort
What do favorable variances indicate?
Favorable means that the actual costs is less than standard costs
How is standard cost percent for any given day calculated?
Standard cost for that day / sales for that day
What is typically true about actual costs compared to standard costs?
Actual costs today and to date are generally greater than standard costs
What can lead to differences between standard and actual costs?
- Overpurchasing
- Overproduction
- Pilferage
- Spoilage
- Improper portioning
- Failure to follow standard recipes
What is the goal of management regarding discrepancies between actual and standard costs?
Make intelligent judgments about the extent to which reductions are possible and accept some small discrepancy
What distinguishes achievable standards from ideal standards?
Achievable standards are realistic and consider normal spoilage and inefficiency, while ideal standards represent a state of perfection
What are standards in the context of cost management?
Goals that should be realistic and attainable
Fill in the blank: Standard costs are compared to actual costs, and mathematical deviations between the two are termed _______.
variances
What does it mean if actual costs are greater than standard costs?
It should be regarded as waste or excessive cost that can be reduced
Standard cost vs actual cost
standard cost is an estimate of the expected cost, actual cost is what was actually spent to produce the product
