Standard

Costing and
Variances
Group 6:
Atentar, Aprilyn
Lomayno, Jaimelyn
Pangilinan, Mary Julien Joy
Tigas, Aibelle

Standard Cost
Represents the planned costs of a production and
are generally established well before the
production begins
Expected costs to be achieved in a particular
production process
Allows the comparison between of standard and
actual costs

Actual Costing, Normal

Costing and Standard
Costing

Actual Costing- product costs are only recorded when

incurred
Normal Costing- direct materials and direct labor costs are
accumulated as they are incurred; factory overhead is applied
to production, on the basis of actual input multiplied by
overhead application rate
Standard Costing- all costs attached to products are based
on standard or predetermined accounts.

Actual Costing, Normal

Costing and Standard
Costing
Actual Costing

Normal Costing

Standard Costing

Direct materials

Actual

Actual

Standard

Direct Labor

Actual

Actual

Standard

Factory Overhead

Actual

Applied

Standard

Cost of a product

Standard Costs and Budgets

Standard Costs: standard cost of a single unit

Budgeted Costs: the cost, at standard, of the

total number of budgeted units

Standard costs versus

Estimated Costs
Standard Costing

Estimated Costing

(1) what the cost should be

(1) what the cost will be

(2) Used o evaluate actual performance; serves

as an effective tool of cost

(2) Used to cost ascertainment for fixing sales

price

(3) Used on the basis of scientific

(3) Used on the basis of statistical facts and

figures

Uses of Standard Costs

1. Cost Control
2. Pricing Decision
3. Performance Appraisal
4. Cost Awareness
5. Management by Objectives

General Model for

Standard Cost Variance
Analysis
Actual Cost
x
Actual Price

Actual Cost
Standard Cost
x
x
Standard Price Standard Price

Price Variance

Quantity Variance

Direct Materials Variances

AP Actual Price
AQ Actual Quantity
AQU Actual Quantity Used
SP Standard Price
SQ Standard Quantity Allowed

DirectMaterials

PriceVariance
UsedVariance
QuantityVariance

Actual
Flexible
AP x AQ
AQ x SP
AQU x AP
AQU x SP
(APSP)xAQU
(APSP)xAQU
(AQUSQ)xSP

Standard
SQ x SP

Illustrative Problem:
Woodtrust Manufacturing Co. is a woodworking shop that builds wooden
tables. During the month, the following events took place.
Standard price for wood
$1.25 per pound
Standard amount of wood per table
8 pounds per table
At the end of the month, the company purchased 950 pounds of wood at
$1.40/pound and has used 875 pounds to make 105 tables. Compute for
the materials variances.

ACTUAL
(AQ x AP)

FLEXIBLE
(AQ x SP)

STANDARD
(SQ x SP)
950 pounds x $1.40 950 pounds x $1.25 840 pounds x $1.25
= $1,330

= $1,187.50

PRICE
VARIANCE

= $1,050

$142.
50
875 pounds x
$1.25
= $1.093

QUANTITY VARIANCE

$43.75

Direct Labor Variances

AHU Actual Hour Used
AR Actual Rate
SHA Standard Hour Used
SR Standard Rate

DirectLabor
Rate(Price)Variance
EfficiencyVariance

Favorable:
Unfavorable:

Actual
Flexible
AHU x AR
AHU x SR
(ARSR)xAHU
(AHUSHA)xSR

actual cost < budget

actual cost > budget

Standard
SHA x SR

Illustrative Problem:
Woodtrust Manufacturing Co. is a woodworking shop that builds wooden
tables. During the month, the following events took place.
Standard quantity
Standard rate

3 hours of direct labor per table

$12/direct labor

At the end of the month, it took 297 hours to make 105 tables and the
company paid direct labor employees $4,009.50. Compute for the labor
variances.

ACTUAL
(AH x AR)

FLEXIBLE
(AH x SR)

297 hours x
$13.50/hour
= $4,009.50

RATE VARIANCE

STANDARD
(SH x SR)

297 hours x $12

315 hours x $12

= $3,564

= $3,780

$445.
50

$216 QUANTITY VARIANCE

$229.
50
TOTAL
VARIANCE

Thankyou!