STANDARD COSTING Flashcards
A system that determines product cost by using standards or norms for quantities and/or prices of component elements. It also allows costs to be compared against norms for cost control purposes.
STANDARD COSTING
a planned unit cost of the product, component or service produced in a period.
Standard Cost
is a unit amount.
standard
is a total amount.
budget
represent optimum levels of performance under perfect operating conditions.
Ideal standards
represent efficient levels of performance that are attainable under expected operating conditions.
Normal standards
should be based on the delivered cost of raw materials plus an allowance for receiving and handling.
direct materials price standard
should establish the required quantity plus an allowance for unavoidable waste and normal spoilage.
direct materials quantity standard
should be based on current wage rates and anticipated adjustments.
direct labor price standard
be based on required production time plus an allowance for rest periods, cleanup, machine setup, and machine downtime.
direct labor quantity standard should
a standard predetermined overhead rate is used. It is based on an expected standard activity index such as standard direct labor hours or standard machine hours.
manufacturing overhead
is the sum of the standard costs of direct materials, direct labor, and manufacturing overhead.
total standard cost per unit
A company controls its production costs by comparing its actual monthly production costs with the expected levels. Any significant deviations from expected levels are investigated and evaluated as a basis for corrective actions. The quantitative technique that is most probably being used is
a. Time-series or trend regression analysis
b. Correlation analysis
c. Differential calculus
d. Standard cost variance analysis
A primary purpose of using a standard cost system is
a. To make things easier for managers in the production facility
b. To provide a distinct measure of cost control
c. To minimize the cost per unit of production
d. b and c are correct
A purpose of standard costing is to
a.
Replace budgets and budgeting
b.
Simplify costing procedures
c.
Eliminate the need for actual costing for external reporting purposes
d.
Eliminate the need to account for year-end underapplied or overapplied manufacturing overhead