Podcast
Questions and Answers
What is the primary purpose of standard costing?
What is the primary purpose of standard costing?
What are the components of standards for each cost element in standard costing?
What are the components of standards for each cost element in standard costing?
What principle does standard costing enable to be practiced?
What principle does standard costing enable to be practiced?
When should standard costs be revised for control purposes?
When should standard costs be revised for control purposes?
Signup and view all the answers
What does standard costing involve for control purposes?
What does standard costing involve for control purposes?
Signup and view all the answers
Study Notes
Standard Costing
- The primary purpose of standard costing is to provide a benchmark against which actual costs can be compared, facilitating cost control and performance evaluation.
Components of Standards
- Standards for each cost element in standard costing comprise:
- Physical standards (quantity of materials, labor hours, etc.)
- Price standards (cost per unit of material, labor rate, etc.)
- Efficiency standards (output per labor hour, etc.)
Principle of Management by Exception
- Standard costing enables the principle of management by exception to be practiced, where attention is focused on deviations from standard costs.
Revising Standard Costs
- Standard costs should be revised for control purposes when there are significant changes in the production process, technology, or market conditions.
Control Purposes
- Standard costing involves establishing standards, recording and reporting actual costs, and analyzing and investigating variances from standard costs for control purposes.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of standard costing and standard costs with this quiz. Explore the preparation of standard costs, their use in variance analysis, and the principles of management by exception. Challenge yourself with questions on monetary and resource requirement components of standards for cost elements.
