Standard Costing & Variance Analysis

• True or False.

  Standard costs represent what costs should be while budgeted costs represent expected actual costs.

  True.
• Ideal standards - are standards that are difficult to achieve due to reasons beyond the individual performing the task
• Normal standards - are standards that represent levels of operation that can be attained with reasonable effort
• A company uses a two-way analysis for overhead variances: budget (controllable) and volume. The volume variance is based on the fixed OH application rate.
• Volume variance is the difference between the budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period