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Date Submitted: 06/15/2012 12:50 PM
STANDARD COSTING AND VARIANCE ANALYSIS
INTRODUCTION 6
DEFINITON 8
HOW TO CREATE STANDARD COST 11
VARIANCE ANALYSIS 13
VARIANCE CALCULATION 14
FIXED OVERHEAD VARIANCES 18
MIX AND YIELD VARIANCE 20
INVESTINGATING VARIANCE 22
PLANNING AND OPERATION VARIANCE 24
CAUSES OF VARIANCE 25
BENCHMARKING 27
McDONALDIZATION 29
ADAVANTAGE & DISADVANTAGE 32
BIBLIOGRAPHY 34
Introduction to Standard Costing
A standard cost is planned or forecast unit cost for a product or service, which is assumed to hold good given expected efficiency and cost levels within an organization. It represents a target cost and is useful for planning, controlling and motivating within an organization.
Variance analysis is a budgetary control process, which compares standard or budgeted costs and revenues with the actual results of an organization, in order to obtain information regarding any exceptions from budget, this information is also used to improve performance through control action e.g. correction problems.
Standard costing can be used for
Budget preparation e.g. planning
Control through exception reporting e.g. performance measurement
Stock valuation
Cost bookkeeping
Motivating staff
Under a standard costing system an organisation can value stock at standard cost, incorporating this within the ledger or cost accounts of the organization, the budget or forecasts being a memorandum kept outside the ledger accounts.
Types of Standard
Ideal Standard e.g. attained under the most favourable conditions with no allowance for any waste, scrap, idle time or downtime.
Attainable or Expected Standard e.g. what should be achieved with a reasonable level of effort given current efficiency and cost levels....