Standard costing + variance analysis Flashcards
MATERIALS
Total variance: no of units - £
Actual: price
Should: use rate to calculate price
REMEMBER: total variance includes both of these variances below!!!
Price variance: based on kg used - £
Actual: price
Should: use price/kg to calculate
Usage variance: based on units produced - kg
Actual: kg
Should: use kg/unit to calculate
Variance in kg * standard cost of kg
LABOUR
Total: based on units
Actual: price
Should: based on rate
REMEMBER: total variance includes both of these variances below!!!
Labour rate: based on hours - £
Actual: price
Should: based on standard hours per unit
Labour efficiency: based on no of units - hours
Actual: hours
Should: hours based on no of units produced
Variance in hours * standard cost per hour
VARIABLE PRODUCTION OVERHEAD
Total: based on units
Actual: overhead cost
Should: rate * no of units
REMEMBER: total variance includes both of these variances below!!!
Expenditure: based on hours - £
Actual: overhead cost
Should: actual hours * rate
Efficiency: based on units - hrs
Actual: hours
Should: no of units * planned hours per unit
Hourly variance * standard hourly cost
STANDARD COSTING
= a control technique that reports variance by comparing actual costs to pre-set standards so facilitating action through mgmt by exception
GOOD = aids more accurate budgeting, allows variance analysis, simplifies bookkeeping, staff motivation, provide a yardstick through which actual costs can be measured
BAD = difficulty in establishing a measurable unit (limited to measurable outputs ie hours kg etc), the cost units are different (heterogenous) / lack of standardisation, labour influence on the service is great and human elements are hard to predict + standardise
THEREFORE Co NEED TO:
- establish a measurable unit
- attempt to reduce heterogeneity of services
- reduce the element of human influence
FIXED COST
actual - budget = fixed cost variance
SALES
Sales price: based on no of units
Actual: revenue
Should: no of units * original selling price per unit
Sales volume: no of items sols
Actual: X items
Should: budgeted no of items X
Variance in no of items * STANDARD CONTRIBUTION !!!!
