Standard Costing - Direct Costs Flashcards

1
Q

What is standard costing?

A

The planned unit cost of a product or service, whereas budget setting is concerned with the costs of sections of the organisation.

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2
Q

Difference between Marginal and absorption standard costing?

A

Marignal - just look at variable costs, address fixed costs at the end
Absorption - Fixed costs intergrated into each product.

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3
Q

What are the advantages of standard costing?

A

To help with decision making - pricing decisions
Assist in planning - plan quantity and cost of resources needed for future production
Monitoring and controlling - Standard costs can be compared with actual costs

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4
Q

Advantages of Basic standard?

A

Can be used to identify trends, used to make comparisons

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4
Q

Name 4 types of standard

A

Ideal standard - no allowances for inefficiencies or wastage of labour or materials, assumes perfect conditions
Target Standards - Set at the level which the organisations wishes to achieve, designed to be challenging but attainable.
Normal Standard - Level which is expected to be achieved under current operating conditions
Basic Standard - Historical standard that allows comparisons to be carried out over long periods of time.

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5
Q

Disadvantages of Basic standard?

A

Set on old historical out of date, not compariable with current conditions

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6
Q

Advantages of Target Standard?

A

Fair and achieveable if set correctly
Chalenges and motivates employees
Bonus schemes can be introduced

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7
Q

Disadvantages of Target Standard?

A

Different people have different views on what is attainable
Can be time consuming
Needs to be reviewed regularly

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8
Q

Advantages of Ideal standard?

A

Everything is perfect

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9
Q

Disadvantages of Ideal standard?

A

Variances generally adverse
Unattainable = Demotivates
No room to offer a bonus scheme, as it wont be achieved.

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10
Q

What is the matrix for materials

A

AQ x AP
AQ x SP
SQ x SP

SQ is worked out as (actual output x (budgeted materials/budgeted output)

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11
Q

What is the matrix for labour

A

AH x AR
AH x SR
SH x SR

SH is worked out as (actual output x (budgetd hours/budgeted output)

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12
Q

How to work out material price variance?

A

Actual - (Actual x Standard)

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13
Q

How to work out Labour rate variance?

A

Actual hours - (Actual x standard)

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13
Q

How to work out material usage variance?

A

AQ x SR - Standard

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14
Q

How to work out Labour efficiency variance?

A

AH x SR - SH x SR

15
Q

What may cause a direct material price variance?

A

Change of supplier
Change of quality of material - better material, usually cost more
World wide price changes

16
Q

What may cause a direct material usage variance?

A

Higher wastage
Poor skill level of labour

17
Q

What may cause a direct labour rate variance?

A

Pay rate change
bonuses paid at more or less than planned
More or less overtime

18
Q

What may cause a direct labour efficiency variance?

A

Amount of idle time
Level of training staff
Quality of materials