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Standard Costing - Coggle Diagram
Standard Costing
What is Standard costing
It's a system an entity uses to measure their standard cost of production
Who uses Standard Costing
entities that have a frequent manufacturing system
Mr. Price
use same materials to produce in bulk
Gert-Johan Coetzee
Uses custom materials for each client
Why is standard costing used?
to make decisions
production costs
material costs
labour costs
cost management
measure performance
How do we do Standard Costing
Establish or set standards
engineered (ideal)
past experiences & inefficiencies
Compare Standard vs actual
for all inputs (Material, Labour & overheads) price & quantity
Analyse the variances
favourable
unfavourable
Calculate the variances
price variance (SP - AP)
SP
quantity variances (SQ - AQ)
SP
Formulae
Material variances
Labour variances
Price = (SP-AP) x actual units x AQ
Volume = (SQ - AQ) x Actual units x SP
sales variance
Sales price = (AP - SP) x Actual units
Sales volume = (AQ - SQ) x SP