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COSTING AND
VARIANCE
ANALYSIS
MAF 551
MANAGEMENT
ACCOUNTING AND
CONTROL
STANDARD COSTING SYSTEM
variances investigated
and corrective actions
STANDARD COST
VARIANCE ANALYSIS
to promote management
action at the earliest possible
stages in overcoming any
discrepancies and problems
TYPES OF STANDARDS
2) Ideal standard
1) Basic standard
- a standard which can be
- a standard establish for use
attained under the most
over a long period from which
favourable conditions, with no
a current standard can be
allowance for normal losses,
developed
waste and machine down time.
3) Attainable standard
- a standard which can be 4) Current standard
attained if a standard unit work - a standard established for
is carried out efficiently, a use over a short period of time,
machine properly operated or related to current conditions
material
DETERMINATION OF STANDARDS
METHODS
– material usage:
• bill of materials
– describes and states the required material for each
operation
SOURCES OF INFORMATION
• DIRECT LABOUR STANDARD
– labour rate:
• from personnel department
• any trade unions negotiations
• bonus scheme
– labour hour:
• technical specifications needed
• unavoidable delays
– machine breakdown, idle time etc
• PRODUCTION OVERHEAD
– predetermined rates (OAR)
– per labour hour/ per machine hour
ADVANTAGES OF STANDARD
COSTING
1. Determine the best 2. Provides a yardstick
possible combination of for performance
resources allocation evaluations a control
and costs that may lead measure; using
to economies of scale. variance analysis.