Standard Costing

Question 1

What is a standard cost?

Answer 1

estimates of costs in advance- if everything was to go to plan, a unit should cost x pounds to make (and then can compare to actual)

Question 2

What are the four types of standard cost?

Answer 2

Basic cost- assumes nothing had changed since the standard was first set (ie inflation rate)
Current standard- assumes current efficiency and cost levels will be maintained
Attainable Standard- assume some improvements in current efficiency and cost levels
Ideal standard- assumes optimum level of efficiency, cost and minimisation of waste

Question 3

What does the standard cost allow you to do/

Answer 3

budget and then carry out Variance Analysis (where actual results are compared to the standard), helps to identify driver behind the variance

Question 4

How can you identify the standard quantities of a resource needed?

Answer 4

• use past experience
• look at detailed product specs so exact design is known
• discuss with experts in each department

Question 5

How do you identify standard prices to be set?

Answer 5

• current prices
• expected future price changes
• availability of discounts
• Range of suppliers available

Question 6

What is piecework?

Answer 6

rate of pay is established per unit of output

people will work more efficiently and be motivated

Question 7

what is a standard hour?

Answer 7

NOT per hour worked, per output produced standard hours