Page 241 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Standard Cost: It is a predetermined cost. It is a determination in advance of production, of what
should be the cost.
Standard Costing: It is the system of cost accounting which makes use of predetermined standard
cost relating to each element of cost-materials, labour and expenses, for each line of product
manufactured of service applied.

Standard Hour: It is the quantity of output, or an amount of work, performed in one hour.
Standard: It refers to an indicator which is used to evaluate performance, quality etc.
Variance: The difference between the actual and the standard is called variance.

12.7 Review Questions

1. Discuss the utility of variance analysis in cost control. What are the major causes for
efficiency, volume, capacity and calendar variance?
2. Point out the differences between standard costing and historical costing. Give in brief the
advantages and disadvantages of the two systems.
3. If cost information is limited to an analysis of actual costs, state how this would effect cost
control.

4. Discuss the basic principles in any standard costing system.
5. What are the several types of standards and what are the assumptions as to the factors on
which these standards are based?

6. Define ‘standard cost’ and ‘standard costing’. In what type of industries, standard costing
is employed? State the advantages of standard costing.
7. Describe the process of determining standard costs.

8. State the various classifications of variances. How are these variances computed?
9. Differentiate between material and overhead variances.
10. Enumerate the different types of material variances and write a brief note on each one of
them.

Answers: Self Assessment

1. Standard 2. Incurred
3. Standard costing 4. Variation
5. planning 6. Cost centre

7. Current 8. Favourable
9. Attainable 10. Hour
11. cost 12. Variable
13. Material Usage or Quantity 14. Labour

15. Material cost

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