STANDARD COSTING
What are the key concepts of standard costing?
- 🎯 Standard Costs: Predetermined costs set for materials, labor, and overhead based on expected prices, rates, and usage levels.
- 📊 Variances: Differences between standard costs and actual costs, including material cost variances, labor cost variances, and overhead cost variances.
- 📈 Performance Measurement: Standard costing helps evaluate performance by comparing actual results with predetermined standards.
How is standard costing used?
- 💼 Cost Control: Standard costing aids in controlling costs by providing benchmarks for comparison and analysis.
- 🏆 Performance Evaluation: It is utilized to assess the performance of departments, processes, or individuals within an organization.
- 📦 Inventory Valuation: Standard costing contributes to valuing inventory for financial reporting purposes.
How are standards set in standard costing?
- 🛠️ Direct Materials: Standard material costs are determined based on expected prices per unit and quantities required for production.
- 👩🏭 Direct Labor: Standard labor costs are established by considering factors such as expected labor hours per unit and standard labor rate per hour.
- 🔧 Overhead Costs: Factors considered in setting standard overhead costs include both variable and fixed overhead.
What are the benefits of standard costing?
- 📉 Cost Transparency: Standard costing enhances transparency in cost management by providing clear benchmarks for evaluating performance.
- 📊 Decision Support: It supports decision-making by comparing actual costs to standard costs.
- 🎯 Incentive Alignment: Standard costing can be used to establish performance targets and incentives that align with organizational goals.
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