standard costs
predetermined unit costs which companies use as measures of performance
ideal standards
Standards based on the optimum level of performance under perfect operating conditions.
normal standards
Standards based on an efficient level of performance that are attainable under expected operating conditions
direct materials price standard
the cost per unit of direct materials that should be incurred
direct materials quantity standard
the quantity of direct materials that should be used per unit of finished goods
direct labor price standard
the rate per hour that should be incurred for direct labor
direct labor quantity standard
the time that should be required to make one unit of the product
standard predetermined overhead rate
An overhead rate determined by dividing budgeted overhead costs by an expected standard activity index.
normal capacity
the average activity output that a company should experience over the long run
variances
differences between total actual costs and total standard costs
total materials variance
The difference between the actual quantity times the actual price and the standard quantity times the standard price of materials (sq
sp)-(aq
ap)=
materials price variance
the difference between the actual quantity times the actual price and the actual quantity times the standard price for materials AQ(SP-AP)
materials quantity variance
The difference between the actual quantity of materials used in production and the standard quantity allowed for the actual output, multiplied by the standard price per unit of materials. SP (SQ-AQ)
total labor variance
The difference between actual hours times the actual rate and standard hours times the standard rate for labor. (ST
SR) - (AT
AR)
labor price variance
The difference between the actual hours times the actual rate and the actual hours times the standard rate for labor
labor quantity variance
The difference between actual hours times the standard rate and standard hours times the standard rate for labor
AT(SR-AR)
total overhead variance
the difference between actual overhead costs and overhead costs applied to work done, based on standard hours allowed
standard hours allowed
the hours that should have been worked for the units produced.