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Standard costing and variance analysis

[Explanations]

Learning objectives:

Explain the terms ‘standard’ and ‘standard costing’.
Differentiate between standard and budget.
Compute and interpret direct materials, direct labor and variable and fixed manufacturing overhead variances.
Explain the purpose of preparing a variance performance report.

Number of pages: 10
Approximate time required: 3 – 3.5 hours

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Explanation of standards and standard costing

Difference between standards and budgets

Types of standards in standard costing

Direct materials price and quantity standards

Direct labor rate and quantity standards

Direct materials price variance

Direct materials quantity variance

Direct material mix variance

Direct material yield variance

Direct labor rate variance

Direct labor efficiency variance

Variable manufacturing overhead standards and variances

Variable overhead spending variance

Variable overhead efficiency variance

Fixed overhead spending variance

Fixed overhead volume variance

Variance performance report

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