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Chapter 15

Standard costing

Outcome

By the end of this session you should be able to:

 One way that the examiner can easily test your understanding of variances is to
ask you to calculate the following instead of straightforward variance
calculations:

 actual figures from variances and standards

 standards from variances and actual figures.

 explain the purpose and principles of standard costing

 explain and illustrate the difference between standard, marginal and absorption
costing

 establish the standard cost per unit under marginal costing and absorption
costing

 calculate sales price and volume variance

 calculate materials total, price and usage variance

 calculate labour total, rate and efficiency variances

 calculate the variable overhead total, expenditure and efficiency variance

 calculate fixed overhead total, expenditure and, where appropriate, volume,
capacity and efficiency variance

 interpret the variances

 discuss the relative significance of variances

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