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Standard Costing

Standard Costing. Actual Costing DM: Actual cost DL: Actual cost OH: Actual cost Normal Costing DM: Actual cost DL: Actual cost OH: Apply OH based on estimated cost. Standard Costing. Standard Costing DM: Standard cost DL: Standard cost OH: Standard cost What are “standard costs?”

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Standard Costing

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  1. Standard Costing • Actual Costing • DM: Actual cost • DL: Actual cost • OH: Actual cost • Normal Costing • DM: Actual cost • DL: Actual cost • OH: Apply OH based on estimated cost

  2. Standard Costing • Standard Costing • DM: Standard cost • DL: Standard cost • OH: Standard cost • What are “standard costs?” • Ideal • Realistic • Standard cost = standard quantity x standard price • Standard quantity materials, labor and overhead • Standard price materials, labor and overhead

  3. Standard Costing • Standard cost = standard quantity x standard price • Actual cost = actual quantity x actual cost • Variance = Actual cost – Standard cost • Price variance = (AP – SP) x AQ • Usage variance = (AQ – SQ) x SP • Investigate variances • Standard cost $350,000; Actual cost $350,322 • Standard cost $350,000; Actual cost $257,699

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