Revision Bitesize Standard Costing & Variance Analysis
QuestionsWhat is the definition of the following terms:1) Standard Costing Answer 2) Attainable Standard Answer 3) Variance Answer 4) Ideal Standard Answer 5) Standard Cost Answer 6) Variance Analysis Answer 7) Adverse Variance Answer 8) Favourable Variance Answer
Revision Bitesize Standard Costing & Variance Analysis
Answers1) A control technique that compares standard costs and standard revenues with actual costs and actual revenues in order to determine differences (variances) that may then be investigated.
Question 2) A standard that can be achieved in normal conditions. It takes into account normal losses, and normal levels of downtime and waste.
Question 3) The difference between budget and actual.
Question 4) A standard that is based upon the premise that everything operates at the maximum level of efficiency. It takes no account of normal losses, or of normal levels of downtime and waste.
Question 5) An estimate of what costs should be.
Question 6) A means of assessing the difference between a predetermined cost/income and the actual cost/income.
Question 7) A difference arising that is apparently 'bad' from the perspective of the organisation. For example, when the total actual materials cost exceeds the total standard cost due to more materials having been used than anticipated. Whether it is indeed 'bad' will be revealed only when the cause of the variance is identified. It may, for example, have arisen as a result of an unexpected rise in demand for the product being produced.
Question 8) A difference arising that is apparently 'good' from the perspective of the organisation. For example, when the total actual labour cost is less than the total standard cost because fewer hours were worked than expected. Whether it is indeed 'good' will be revealed only when the cause of the variance is identified – it may be that fewer hours were worked because demand for the product fell unexpectedly. Question
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