Module 3 - Standard Costing Flashcards
1
Q
What is a standard cost?
A
The expected cost of a product, often measured in cost per unit.
Made up of material + overhead + labour.
2
Q
What is the budgeted cost?
A
The cost to manufacture all anticipated units.
Made up of material + overhead + labour
3
Q
What is the standard cost based on and what should they allow for?
A
Forecasts or estimates.
They should allow for machine faults, normal wastage and other normal down time.
4
Q
Who uses standard costing?
A
Batch and volume processors
5
Q
What are the two elements of variance?
A
Volume and efficiency
6
Q
Name four problems with Standard Costing.
A
- Produced on a monthly basis rendering them out of date.
- Focus on negative performance, meaning workers may increase volume at loss of quality.
- Direct labour is often not a significant cost.
- Less material in a product may indicate poorer quality but a better variance.
7
Q
What are the three different types of variance?
A
- Planning
- Operational
- Cost
