Description
It explains what is standard costing, what are the steps involved in standard costing,
STANDARD COSTING
Dr. Kinnarry Thakkar
Steps in Standard costing
Set standard cost ? Study the actual cost ? Compare the actual with the standard cost Which gives variances Analyse the variances Fix responsibilities Take suitable action and create effective control system .
?
Analysis of variances
Material
Labour Overheads
cost = price + usage
cost
= Rate + efficiency
Variable Overhead variances
Fixed Overhead variances
Price+ Usage =Cost
Rate+ Efficiency =Cost
A General Model of Variance Analysis (Material)
Actual Quantity × Actual Price Actual Quantity × Standard Price Standard Quantity × Standard Price
Price Variance
AQ(SP - AP) AQ = Actual Quantity AP = Actual Price
Usage Variance
SP(SQ - AQ) SP = Standard Price SQ = Standard Quantity
Standard Cost Variances
Standard Cost Variances
Price Variance
Efficiency Variance
The difference between the actual price and the standard price
The difference between the actual quantity and the standard quantity
Standard Cost Variance
This variance is unfavorable because the actual cost exceeds the standard cost.
Standard Product Cost A standard cost variance is the amount by which an actual cost differs from the standard cost.
Direct Labour Standards
Rate Standards Efficiency Standards
Use wage surveys and labor contracts.
Use time and motion studies for each labour operation.
Direct Labour Standard
The standard labour cost for one unit of product is:
standard wage rate for one hour
×
standard number of labour hours for one unit of product
A General Model of Variance Analysis
Actual Hours × Actual Rate Actual Hours × Standard Rate Standard Hours × Standard Rate
Rate Variance
AH(SR - AR) AH = Actual Hours AR = Actual Rate
Efficiency Variance
SR(SH - AH) SH = Standard Hours SR = Standard Rate
Overheads Variances
Standard Hours for actual output(SH)= Budgeted Hours X Actual Output Budgeted Output Standard Overheads (SO) = SH X SR Recovered Overheads (RO) = AH X SR Budgeted Overheads (BO) = BH X SR Actual Overheads (AO) =AH X AR
doc_691315252.ppt
It explains what is standard costing, what are the steps involved in standard costing,
STANDARD COSTING
Dr. Kinnarry Thakkar
Steps in Standard costing
Set standard cost ? Study the actual cost ? Compare the actual with the standard cost Which gives variances Analyse the variances Fix responsibilities Take suitable action and create effective control system .
?
Analysis of variances
Material
Labour Overheads
cost = price + usage
cost
= Rate + efficiency
Variable Overhead variances
Fixed Overhead variances
Price+ Usage =Cost
Rate+ Efficiency =Cost
A General Model of Variance Analysis (Material)
Actual Quantity × Actual Price Actual Quantity × Standard Price Standard Quantity × Standard Price
Price Variance
AQ(SP - AP) AQ = Actual Quantity AP = Actual Price
Usage Variance
SP(SQ - AQ) SP = Standard Price SQ = Standard Quantity
Standard Cost Variances
Standard Cost Variances
Price Variance
Efficiency Variance
The difference between the actual price and the standard price
The difference between the actual quantity and the standard quantity
Standard Cost Variance
This variance is unfavorable because the actual cost exceeds the standard cost.
Standard Product Cost A standard cost variance is the amount by which an actual cost differs from the standard cost.
Direct Labour Standards
Rate Standards Efficiency Standards
Use wage surveys and labor contracts.
Use time and motion studies for each labour operation.
Direct Labour Standard
The standard labour cost for one unit of product is:
standard wage rate for one hour
×
standard number of labour hours for one unit of product
A General Model of Variance Analysis
Actual Hours × Actual Rate Actual Hours × Standard Rate Standard Hours × Standard Rate
Rate Variance
AH(SR - AR) AH = Actual Hours AR = Actual Rate
Efficiency Variance
SR(SH - AH) SH = Standard Hours SR = Standard Rate
Overheads Variances
Standard Hours for actual output(SH)= Budgeted Hours X Actual Output Budgeted Output Standard Overheads (SO) = SH X SR Recovered Overheads (RO) = AH X SR Budgeted Overheads (BO) = BH X SR Actual Overheads (AO) =AH X AR
doc_691315252.ppt