Standard Costing

Standard Costing

1. Standard Cost Card

   • Standard Cost: estimated cost unit

2. Setting Standard Costs

   • Labour time
   • Labour rate
   • Material Usage
   • Material Price
   • Variable Production Overhead
   • Fixed production overhead
     • OAR

3. Types Standard

   • Ideal: Perfect working conditions at all times
     • no allowance for wastage or inefficencies
     • Problems
       • doesn't reflect reality
         • Budgets inaccurate
       • Always be wastage and inefficencies
         • de-motivate workers
   • Target: some improvements - allows for inefficencies
     • achievable - realistic conditions
     • motivational
   • Normal: current working conditons
     • doesn't attempt to improve on conditions
   • Basic: unaltered over a long period of time
     • Out of date
     • rarely used for variance analysis & budgeting