Trial of Standard Costing
Standard Cost Accounting
Learning Objectives
Describe the different standards used in determining standard costs.
Determine procedures for recording standard costs.
Compute and analyze variances.
Prepare journal entries to record variances.
Examine and interpret variances.
Recognize the features of a standard cost system.
Account for standard costs in a departmentalized factory.
Distinguish between actual and applied factory overhead.
Standard Costing
•The purpose of standard cost accounting is to control costs and promote efficiency.
•It is not another accounting method for accumulating manufacturing costs, but is used in conjunction with such methods as job order, process, or backflush costing.
•Standard costing is based on predetermination of what it should cost to manufacture a product, and the inventory accounts are debited for these standard costs.
•Types of Standards:
•Standard
•Ideal standard
•Attainable standard
Standard cost accounting is based on the following procedures:
•Standard costs are determined for the three elements of cost: direct materials, direct labor, and factory overhead.
•The standard costs, the actual costs, and the variances between the actual and standard costs are recorded in the appropriate accounts.
•Significant variance are analyzed and investigated and then appropriate action is taken.
•Materials cost standard is based on estimates of the quantity of materials requiredfor a unit of product and the unit cost to purchase the materials used.
•Labor cost standard is based on estimates of the labor hours required to produce a unit of product and the cost of labor per unit.
•A variance represents the difference between the actual and the standard costs of materials, labor, and overhead.
•Variances measure efficiencies or inefficiencies in usage and price.
Features of a Standard Cost System
•The fact that standards are based on estimates does not make them unreliable.
•Standards will change as conditions change.
•The purpose of using a
Learning Objectives
Describe the different standards used in determining standard costs.
Determine procedures for recording standard costs.
Compute and analyze variances.
Prepare journal entries to record variances.
Examine and interpret variances.
Recognize the features of a standard cost system.
Account for standard costs in a departmentalized factory.
Distinguish between actual and applied factory overhead.
Standard Costing
•The purpose of standard cost accounting is to control costs and promote efficiency.
•It is not another accounting method for accumulating manufacturing costs, but is used in conjunction with such methods as job order, process, or backflush costing.
•Standard costing is based on predetermination of what it should cost to manufacture a product, and the inventory accounts are debited for these standard costs.
•Types of Standards:
•Standard
•Ideal standard
•Attainable standard
Standard cost accounting is based on the following procedures:
•Standard costs are determined for the three elements of cost: direct materials, direct labor, and factory overhead.
•The standard costs, the actual costs, and the variances between the actual and standard costs are recorded in the appropriate accounts.
•Significant variance are analyzed and investigated and then appropriate action is taken.
•Materials cost standard is based on estimates of the quantity of materials requiredfor a unit of product and the unit cost to purchase the materials used.
•Labor cost standard is based on estimates of the labor hours required to produce a unit of product and the cost of labor per unit.
•A variance represents the difference between the actual and the standard costs of materials, labor, and overhead.
•Variances measure efficiencies or inefficiencies in usage and price.
Features of a Standard Cost System
•The fact that standards are based on estimates does not make them unreliable.
•Standards will change as conditions change.
•The purpose of using a