Standard Costing & Variance Analysis Flashcards
A Standard Cost…
Is a carefully pre-determined unit cost that is prepared for each cost unit and becomes the target price to measure performance.
A Standard…
Is a benchmark measurement set in defined conditions.
There are four typed of standard…
- Ideal - No allowance for inefficiencies.
- Attainable - Assume efficient operations.
- Current - Based on current performance.
- Basic - Set for the long term.
Direct Material Total Variance =
Direct Material Price Variance + Direct Material Usage Variance.
Direct Material Price Variance =
The consequence of paying a difference price.
Should cost - Did cost.
Direct Material Usage Variance =
The consequence of using a different quantity of material.
(Should have used - Did use) x Standard Price.
Direct Labour Total Variance =
Direct Labour Rate Variance + Direct Labour Efficiency Variance.
Direct Labour Rate Variance =
The consequence of paying a different rate.
Should cost - did cost.
Direct Labour Efficiency Variance =
The consequence of using a different number of hours.
(Should have taken - Did take) x Standard Price.
Variable Overhead Total Variance =
Variable Overhead Expenditure Variance + Variable Overhead Efficiency Variance.
Variable Overhead Expenditure Variance =
The consequence of paying a different rate.
Should cost - Did cost.
Variable Overhead Efficiency Rate =
The consequence of using a different number of hours.
Variance (hrs) x Standard OAR.
There are two main Sales Price Variances…
Sales Price Variance and Sales Volume Contribution Variance.
Sales Price Variance =
The consequence of charging a different selling price.
Should sell for - Did sell for.
Sales Volume Contribution Variance =
The consequence of selling a different quantity.
(Actual Sales - Budgeted Sales) x Standard Contribution.
