standard costing and variance analysis

pexels photo 936133 1

Variance analysis – meaning

Variance analysis is the process of computing the amount of and isolating the cause of variance between actual cost or revenue and standard cost and revenue.



Variance analysis involves the computation of individual variance and determination of causes of each variance.  

The purpose of variance analysis is to enable management to improve operations, increase … Read the rest

7 limitations of standard costing

7 limitations of standard costing.

Standard costing is a managerial control technique that facilitates a comparison of standard cost and revenue with actual results to obtain variance that is used to stimulate improved performance.  

The following are limitation of standard costing:

  • The standard costing system assumes that performance to standard is acceptable. Today’s business environment is more focused on continuous improvement
  • Standard costing was
Read the rest
startup photos

Variable overhead variance – meaning, causes and formula.

Variable overhead variance: Variable overheads vary directly with the volume of output and hence, the standard variable overheads very directly with the volume of output and hence, the standard variable overhead rate remains uniform. Therefore, computation of variable overhead variance, also known as variable overhead cost variance parallels the material and labour cost variances.



Thus, … Read the rest

pexels photo 4386373 1

3 differences between budget and standard cost.

A budget is the quantitative expression of a plan of action prepared for the entire organization or for various departments or for various functions involved in the organization.
Standard cost is the predetermined cost calculated in relation to a prescribed set of working conditions, correlating technical specifications and scientific measurement of materials and labor to the process and wage rates … Read the rest

coffee cup books home 1

11 advantages of standard costing.

Standard costing is managerial control technique that facilitates a comparison of standard cost and revenue with actual results to obtain variance that are used to stimulate improved performance.



The following are advantages of standard costing:

  • It provides yard stick against which actual are measured.
  • It helps in valuing the closing stock.
  • It helps in fixing
Read the rest
pexels photo 3759098 1

Standard costing and variance analysis revision question (NBAA, B5,NOV 2018)

Rorya Cakes Bakery makes a single product called Delicious Cakes. The company is using marginal costing to value its product. The company standard cost card for Delicious Cakes comes from the parent company called Rorya Oven headquartered in Malaysia, which contains the following:

Direct Material:                                                                                        TZS

Ingredient A:                            (2 kg @ TZS.1,500)                        3,000

Ingredient B:                            (1.5 litres @ TZS.1,200)               … Read the rest