Topic 5 Standard Costing

Topic 5 Standard Costing

1. Defined

   • Pre- Determine estimated unit cost

2. 3 Step

   • Establish the pre-determined estimates
   • Collection of actual costs
   • Comparison of actual costs with pre-determine estimates

3. Purpose

   • 1. To value inventories and cost production
     • 2. Act as a control device by setting standard

4. Type of variance (Formula)

   • Sales Variance
     • Sales Price Variance
       • [(Actual Price – Std Price)] x Actual Qty Sold
     • Sales Volume Variance
       • [(Actual Qty Sold – Standard Qty Sold)] x Standard Price Per unit
   • Materials Variance
     • Material Usage Variance
       • Standard Price x [(Actual Qty Material – Std Qty Material]
     • Material Price Variance
       • Actual Qty Material x [(Actual Price each Material–Std Price each Material]
   • Labour Variance
     • Labour Rate Variance
       • Actual Hours x [(Actual Rate paid – Std Rate paid)]
     • Labour Efficiency Variance
       • Std Rate x (Actual Hrs – Std Hrs )
   • Variable Overheads Variance
     • Variable Overheads Price Variance
       • Actual Quantity x [(Actual Price – Std Price ]
     • Variable Overheads Efficiency Variance
       • Standard Price x [Actual Qty – Std Qty]
   • Fixed Overheads Expenditure Variance
     • Actual Expenditure – Standard Expenditure