In standard costing normal standard is the average standard which it is anticipated can be attained over a future period of time, preferably, long enough to cover one trade cycle. Accordingly, this standard may be prepared once in 10 years.
standard costing and variance analysis
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
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
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
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
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
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