Standard costing

    Cards (25)

    • Standard type
      Basic - stay the same and often out of date, show trends over time, targets easy to achieve
      Ideal - perfect manufacturing conditions ie no wastage/ idle time
      Attainable - achievable with hard work and is the most motivating. Based on most efficient manufacturing conditions
      Current - current efficiency levels, material waste machine breakdowns and idle time
    • Sell at lower selling price
      • boost sales volume in poor econ conditions
      • Match competitor pricing
      • Clear stocks
      • Increase market share
    • marginal costing sales volume variance
      value the difference in budgeted and actual sales col at std contribution per unit
      std contributions = budgeted selling price - marginal cost
    • absorption costing sales volume variance
      difference in budgeted and act sales vol at std profit per unit
      std profit = selling price - fixed overhead production - marginal cost
    • cause if sales volume variance
      • increased demand for product (eg price reduced)
      • lower demand for a product than expected (eg downturn in economy)
      • lower production levels than budgeted due to machine breakdown/ strikes
    • materials total variance
      amount actual product cost - flexed materials budget
      amount actual production did cost - actual cost of materials
    • materials total variance
      material price variance + materials usage variance
    • causes material usage variances
      • higher than expected wastage
      • incorrect std
      • higher quality material used , Lowe wastage than normal
      • change in std quality of material require
    • Favourable labour efficiency
      • more highly skilled
      • increased supervision
      • staff training increased
    • adverse labour efficiency variance
      • lower skills Labour
      • new employees
      • demotivated staff
    • fixed production overhead variances
      absorption costing - amount of under or over absorbed fixed production over in budget period
      marginal costing - fixed production overhead expenditure variance (diff between act and budgeted )
    • variance analysis report
      can be used to replaced / support operating statement
      more narrative explanations of variances occurred
    • before investigates variances aspects
      significance
      cost
      control
      elimination
    • sales price variance
      (Act selling price - std selling price) x act units sold
    • sales volume variance
      (act units sold - budgeted units sold) x std margin
    • materials price variance
      (std £/kg - act £/kg) x act qty used
    • materials usage variance
      (std qty - act qty) x std £/kg
    • labour rate variance
      (std £hr - act £hr) x act hours
    • labour efficiency variance
      (std hours - actual hours worked) x std £hr
    • variable overhead efficiency variance
      (std hours - act hours) x std £hr
    • variable overhead expenditure variance
      (std £hr - act £hr) x act hours
    • fixed overhead expenditure variance
      (budgeted fixed costs - act fixed cost)
    • fixed overhead volume variance
      (act units - budgeted units) x std fixed overhead £unit
    • fixed overhead efficient variance
      (std hours - act hours ) x std fixed overhead per hour
    • fixed overhead capacity variance
      (Budgeted hours - act hours) x std fixed overhead per hour