STANDARD COSTING

WHAT IS STANDARD COSTING?

standard a predetermined, budgeted or expected unit cost; the amount that something should cost. variance the difference between an actual and standard cost; the difference between an actual and budgeted amount. direct material the raw materials and component parts that are included in a manufactured product. price variance the difference between the actual cost of the direct material input and the standard cost of the direct material input; often recorded at the time of purchase, but could be reported at the time of use. usage variance the difference between the actual quantity of direct material input used and the standard quantity that should have been used for the actual output of products. rate variance the difference between the actual average hourly pay rate for the direct labor and the standard average hourly pay rate. efficiency variance the difference between the actual quantity of direct labor hours and the standard quantity of direct labor hours that should have been used for the actual output of products; also, one of the variable manufacturing overhead variances.

manufacturing overhead manufacturing costs other than direct material and direct labor; indirect product costs such as factory supervision, depreciation, utilities; burden or factory overhead.

volume variance the difference between the budgeted fixed manufacturing overhead and the standard amount of fixed manufacturing overhead applied to the actual output of products. favorable variance occurs when actual costs are less than the standard costs for the actual output; also occurs when actual revenues are greater than the budgeted revenues. unfavorable variance actual costs are greater than the standard costs for the actual output: actual revenues are smaller than the budgeted revenues. applied assigned or allocated on some basis. For example, manufacturing overhead is applied to products based on the number of standard hours for the good output. input direct materials, direct labor, and manufacturing overhead output products manufactured or partially manufactured.