Standard Costing - Direct Costs Flashcards
What is standard costing?
A formal method for predetermining the cost of cost units or products.
What is variance analysis?
The comparison of actual costs with standard costs and the calculation of variances which account for differences in the costs.
What is marginal costing?
A technique that values cost units based on variable costs only. Fixed costs are considered to relate only to the reporting period of time.
What is absorption costing?
A technique that values cost units based on a suitable part of all the costs of production, whether fixed or variable in behaviour.
What is an ideal standard?
A standard set at a level that makes no allowance for losses, and which can only be attainable under the most favourable conditions.
What is an attainable standard?
A target or normal standard set at a level that assumes efficient levels of operation, but includes allowances for normal loss, waste, and machine downtime.
What is a basic standard?
A standard set some time ago which can be used to identify trends or develop other standards.
What is a tolerance level?
The range around the standard within which performance is considered acceptable and action does not need to be taken.
What is the interdependence of variances?
The fact that a single cause may create two or more separate variances.
What is total direct material variance?
The difference between the standard material cost for the actual production and the actual material cost.
What is direct material price variance?
The part of the total direct material variance due to differing material prices. It is based on the difference between standard and actual prices for the actual quantity of material used (or bought).
What is direct material usage variance?
The part of the total direct material variance due to differing quantities of material used. It is based on the difference between the standard quantity of material for the actual production, and the actual quantity of material used, valued at standard price.
What is total direct labour variance?
The difference between the standard labour cost for the actual production and the actual labour cost.
What is direct labour rate variance?
The part of the total direct labour variance due to differing labour rates. It is based on the difference between the actual labour hours at standard rate and the actual labour cost.
What is direct labour efficiency variance?
The part of the total direct labour variance due to differing time being spent. It is based on the difference between the standard labour time for the actual production, and the actual labour time used, valued at standard rate.
