Accounting for Control: Standard Cost

Question 1

A standard vs a budget

Answer 1

A standard = expected cost for one unit
A budget = expected cost for all units

Question 2

What is a standard cost and examples

Answer 2

The planned unit costs of the products, components or services produced in a period

example: direct labour, materials, OH’s

Question 3

Level of standards

Answer 3

• Basic standards: looking at just the standard costs which dont change over many years so may not reflect the current production
• Ideal standard: assumes nothing will go wrong, represents 100% efficiency and performance. Can demotivate if used to assess performance and unrealistic
• Practical standard: expects people and machines to be efficient but not 100%

Question 4

What are some direct material standards

Answer 4

Price standards - what we think we can realistically make the price of materials. Research

Quantity standards = determine the quantity of materials needed using design specifications. Use product design specs

Question 5

What are some direct labour standards

Answer 5

Rate standards = looking at what we can realistically get workers for. use surveys and contracts

Time standards = how long workers take to do something and how long to give them. use time studies

Question 6

What are variable overhead standards?

Answer 6

Rate standards = the variable portion of the PD OHR

Activity standards = hours or number of units made

Question 7

Standard cost card