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  • This Study Resource Was: Ivias-06: Standard Costing

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    Tracy Miranda Bognot
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    - Standard costing involves establishing benchmark costs for raw materials, labor time, and overhead that management expects costs to be at. These standards are used to measure performance and identify areas where actual costs differ. - There are two main types of standards - quantity standards which specify the input levels needed and cost standards which specify what the costs should be at those input levels. - Standard costs are systematically predetermined and used as a basis for comparing actual costs. Budgets differ in that they are forecasts of expected costs while standards are targets costs should be at for a given level of performance.

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    MAS_06

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    - Standard costing involves establishing benchmark costs for raw materials, labor time, and overhead that management expects costs to be at. These standards are used to measure performance and identify areas where actual costs differ. - There are two main types of standards - quantity standards which specify the input levels needed and cost standards which specify what the costs should be at those input levels. - Standard costs are systematically predetermined and used as a basis for comparing actual costs. Budgets differ in that they are forecasts of expected costs while standards are targets costs should be at for a given level of performance.

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    © All Rights Reserved
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    20 views6 pages

    This Study Resource Was: Ivias-06: Standard Costing

    Uploaded by

    Tracy Miranda Bognot
    - Standard costing involves establishing benchmark costs for raw materials, labor time, and overhead that management expects costs to be at. These standards are used to measure performance and identify areas where actual costs differ. - There are two main types of standards - quantity standards which specify the input levels needed and cost standards which specify what the costs should be at those input levels. - Standard costs are systematically predetermined and used as a basis for comparing actual costs. Budgets differ in that they are forecasts of expected costs while standards are targets costs should be at for a given level of performance.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    IVIAS-06: STANDARD COSTING


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    STANDARD - .a •benchmark set by , management in aid of performance measurement. In manufacturin


    , companies, standards are classified into two (2) categories: . •
    • QUANTITY Standard - indicates the quantity of raw materials or labor time required to produce a
    • unit of,product. This is normally expressed per unit of .output
    / • . (e.g., 3 pieces per unit).
    ,
    • COST Standard - indicates what tl3e cost of the quantity standard should be. This is normally
    ,
    expressed per unit of input: (e.g., P 12.00 per piece).
    •
    SITANDAFID COSTS -- systematically i' re ,--determihed• costs established by management, to k:te , used as a basis
    ' • for comparison with actual cost. ,

    BUDGETS vs. STANDARDS


    BUDGETS STANDARDS
    Purpose Budgets are statements' of expected Standards pertain to what costs should be
    costs; iven a certain level öfjDerformance.
    Emphasis Budgets emphasize cost levels that Standards emphasize the levels' to which costs
    should not be exceeded. should b'e reduced. .
    Coverage Budgets ar;e set , for all departments -- Standards are set only for the production or ,

    m
    sales administration & manufacn. _manufacturing division of the firm:

    er as
    Analysis When actual, data differ from the Material amounts of variance are ,reviewed •
    budget, it • may be an indication. of and investigated so that necessary corrective

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    either food or bad iterformarice. _ are
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    , •
    STANDARD COST VARIANCE ANALYSIS
    -
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    VARIANCE Actual Costs (AC) - Standard Costs (SC)


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    AC > SC: Unfavorable (debit balance).


    . . •
    AC < SC: Favorable (credit balance)
    o

    MATE/RIALS Variance - , ' •


    Actual Materials Cost , Actual Quantity (AQ) x Actual Price (AP)
    aC s

    Standard Materials cost .4 Standard Quantity (SQ) x Standard Price (SP)


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    vi y re

    '

    Materials Cdst Variance .


    Analysis: ,
    Quantity variance: LQxSP •---- Difference in quantities x Standard 'price •
    • , ,
    Price variance:
    , AQx --
    -- Actual quantity '?( Difference n
    i prices
    ed d

    'LABOR Variance • - ,
    ar stu

    Actual Labor CostActual Hours (AH) x Actual Rate (AR)


    - $tandard Labor Cost <- 2 Standard Hours (SFI) x Standard Rate (SR)
    - Labor Cost Variance
    , -

    Analysis:
    is

    Efficiency variance: L HxSR ---- Difference in hours x Standard rate -


    Rate variance: AHxAR = Actual hour x Difference in rates • .
    -
    Th

    FACTORY OVERHEAD (FOH) Variailce = (Actual FOH cost) -- (Standard F01-I cost)
    (Refer to page 2 for complete FOH Variance Analysis)
    ,

    MATERIALS PRICE MIX and YIELD Variances


    sh

    Mix and yield variances are normally calculated whenever the production process involves combining
    several materials to 'produce a unit of product.

    Materials variance = Actual Materials Cost - Standard Materials Cost


    . ,
    Analysts:
    ) , Price var-iane: AQxA .
    Mix variance: (A Q x S P) TAQASP • °
    Yield variance: TAQASP - Standard Cost '
    Legend .• -
    AQ Actual quantity
    - ,C,P Differerice in prices SP - Standard price
    TAQASP Total.Actual Quantity at Average Standard Price \

    ' NOTE: Mix and yield variances may also ,apply to direct labor, specifically in situations where seVerl
    different labor skills are required to produce units of products.

    Page \1 of 6 pages ,

    . I

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