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# PPT - Standard Costs and Variance Analysis B Com Notes | EduRev

## B Com : PPT - Standard Costs and Variance Analysis B Com Notes | EduRev

``` Page 1

Standard Costs and Variance
Analysis
Page 2

Standard Costs and Variance
Analysis
Objectives
1. Explain how standard costs are developed.
2. Calculate and interpret variances for direct
material.
3. Calculate and interpret variances for direct
labor.
Page 3

Standard Costs and Variance
Analysis
Objectives
1. Explain how standard costs are developed.
2. Calculate and interpret variances for direct
material.
3. Calculate and interpret variances for direct
labor.
Standard Costs
Standard cost refers to expected costs
under anticipated conditions.
• Standard cost systems allow for
comparison of standard versus actual
costs.
• Differences are referred to as standard
cost variances.
• Variances should be investigated if
significant.
Standard Costing: Process of
establishing the standard cost
Page 4

Standard Costs and Variance
Analysis
Objectives
1. Explain how standard costs are developed.
2. Calculate and interpret variances for direct
material.
3. Calculate and interpret variances for direct
labor.
Standard Costs
Standard cost refers to expected costs
under anticipated conditions.
• Standard cost systems allow for
comparison of standard versus actual
costs.
• Differences are referred to as standard
cost variances.
• Variances should be investigated if
significant.
Standard Costing: Process of
establishing the standard cost
Development of Standard Costs
1. Standard costs are developed in a variety
of ways:
a. Specified by formulas.
b. Developed from price lists provided by
suppliers.
c. Determined by time studies conducted
by industrial engineers.
d. Developed from analyses of past data.
Page 5

Standard Costs and Variance
Analysis
Objectives
1. Explain how standard costs are developed.
2. Calculate and interpret variances for direct
material.
3. Calculate and interpret variances for direct
labor.
Standard Costs
Standard cost refers to expected costs
under anticipated conditions.
• Standard cost systems allow for
comparison of standard versus actual
costs.
• Differences are referred to as standard
cost variances.
• Variances should be investigated if
significant.
Standard Costing: Process of
establishing the standard cost
Development of Standard Costs
1. Standard costs are developed in a variety
of ways:
a. Specified by formulas.
b. Developed from price lists provided by
suppliers.
c. Determined by time studies conducted
by industrial engineers.
d. Developed from analyses of past data.
Ideal Versus Attainable Standards
Two schools of thought:
1. Ideal standards (perfection standards):
developed under the assumption that no
obstacles to the production process will
be encountered.
2. Attainable Standards: developed under
the assumption that there will be
occasional problems in the production
process.
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## Cost Accounting

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