Standard costing

by :
Dwivana Asri Chasvella
Dini Shelviana
Dina Ridhwana Aflaha
Winda Juliani
Alexander Depatra
1) What is Standard Cost?
• Standard cost are refer to the amount of input that should be used per unit of
output.

2)Why does the company need to develop the standard cost systems?
Because, the existing system cannot be used for manager performance
evaluation purpose and for evaluating the efficiency of our company's
operation. We just compute our product costs at the end of accounting period
in order to prepare the financial statement. as a result, we don't know whether
or not our product costs is efficient becuse we don't know how much cost per
unit of our product. Since there is no department's manager performance
evaluation, they never think to find ways to make the efficiency. Consequently,
no cost culture is built in our company. It will have negative impact on our
company's long term.
3) Why does subsidiary ledger of raw material inventory and finished
goods inventory not necessary when the company implements the
standard cost systems?

• Because, it eliminate all the costs related to the activities of subsidiary

ledger, such as operator salaries, supplies, etc.
• Morever, managers will also think to make cost efficiency in order
their performance will be good.
4) Why should procurement manager be responsible for
price variance of raw materials ?

• Because, performance report can be prepared at the end of

accounting period by comparing between standard cost and actual
cost.
• Then, the variance can be analysed and investigated to find the root
cause.
a. Calculate the direct raw materials cost variance
 Beef
MPV = (100.000-120.000)x4.500
= (90.000.000)
MEV = (4000-4.500)x100.000
= (50.000.000)
DMV = (90.000.000)+(50.000.000)
= (140.000.000)
 Coconut Milk
MPV = (10.000-13.000)x1.800
= (5.400.000)
MEV = (2.000-1.800)x10.000
= 2.000.000
DMV = (5.400.000)+2.000.000
= (3.400.000)
 Spices
MPV = (20.000-19.000)x900
= 900.000
MEV = (1000-900)x20.000
= 2.000.000
b. analysis
Price Variance : -Beef = unfavorable
-Coconut Milk = unfavorable
-Spices = favorable
Quantity Variance : -Beef = unfavorable
-Coconut Milk = favorable
-Spices = favorable

c. Journal
 Beef
Materials inventory 450.000.000
Materials price variance 90.000.000
Cash 540.000.000
 Coconut Milk
Materials Inventory 18.000.000
Materials Price Variance 5.400.000
Cash 23.400.000

 Spices
Materials Inventory 18.000.000
Materials Price Variances 900.000
Cash 17.100.000