Chapter 10 Standard Costing: A Managerial Control Tool
Important keys, Learning and Application in the Business setting
Standard costs are essentially budgeted amounts on a per unit basis. Quantity decision is determined how much in put should be used per unit. Standard costing systems improve planning and control and even facilitate product costing. Actual costing assigns actual manufacturing costs to products. Normal Costing assigns actual prime cost and estimated overhead costs to products. Identifying standards and assessing deviation from standards, business managers can trace areas where change or corrective behavior is necessary. Business managers generally tend to have more control over the quantity of an input used rather than the price. The materials price variance is often computed at the point of purchase rather than issuance because it provides control information earlier. Unit standard are used to build flexible budgets.
In identifying standards and assessing deviation from standards, business
managers can trace areas where change or corrective behavior is necessary generally tend to have more control over the quantity of an input used rather than the price. Chapter Briefer
Chapter 11 Flexible Budgets and Overhead Analysis
Important keys, Learning and Application in the Business setting
It is defined as a detailed plan for controlling overhead cost valid in
the firm’s relevant range activity. It shows revenues and expenses that should have occurred at the actual level of activity and it also reveal variances due to good cost control or lack of cost control.
Spending variance, is the results from paying more or less than
expected for overhead items and from excessive usage of overhead items while Efficiency variance is controlled by the managing the overhead cost driver. Budget variance, results from paying more or less than expected for overhead items. Volume variance is result from operating at an activity level different from the denominator activity.
Business managers used flexible budgets and Overhead Analysis as a
planning tool to predict likely financial results at different levels of activity, it helps in providing more control over cost.