Standard Costing and Variance Analysis Flashcards
Module 2
indicate the qty of raw materials or labor time require to produce a unit of product or to provide services.
Quantity standards
indicate what the cost of the qty standards should be.
Cost standards
a managerial prerogative
Standards setting
when developed with the participation of operating personnel and officers, standards become more reflective of the realities in the production line and other business operations.
Standards setting
Requires perfect performance with no allowance for waste, spoilage, machine breakdowns, and other interruptions.
Theoretical or ideal, or maximum efficiency standard
attainable as they allow for normal machine downtimes, inefficiencies, wastage/spoilage, and other normal disturbances.
Practical standards
normally used for product costing and other budgeting purposes.
Practical standards
comprise of the standard quantity and the standard price. established with the collaboration of operating managers from various functional lines of operations: production, purchasing, HR, industrial engineering, accounting.
Standard Costs
should reflect the final, delivered cost of materials, net of any discount and inclusive of allowances for handling costs.
Standard Price Per Unit
should reflect the units of materials required to produce each unit of product, including allowances for unavoidable wastages, spoilage, and other normal inefficiencies.
Standard Quantity Per Unit
Computed in the same manner as the standards for labor costs are computed.
The quantity and price factors used are time (hours) and variable overhead rate per hour.
Variable Manufacturing Standards
Both are predetermined amounts.
STANDARDS AND BUDGETS
the accounting process that compares planned or projected performance in the business vs actual results.
VARIANCE ANALYSIS
a quantitative tool that is intended to identify deviations and their underlying causes.
VARIANCE ANALYSIS
price and quantity
Direct Materials
