Lecture 5 - Standard Costing and variance analysis.pdf

STANDARD COSTING AND
VARIANCE ANALYSIS
Business Accounting – ACC1644/1244

, CHAPTER OUTLINE
1. Introduction
2. A standard costing system
i. Advantages of standard costing
ii. Disadvantages of standard costing
3. Variance analysis
4. Sales variances
i. Sales price variance
ii. Sales quantity variance
5. Production cost variances
i. Direct material variances
ii. Direct labour variances
iii. Variable manufacturing overheads variances
iv. Fixed manufacturing overheads variances

, INTRODUCTION
 In a manufacturing environment, it can be difficult to
tract down the causes of variances unless a detailed
analysis is carried out.
 These variances can be identified and quantified by using
a standard costing system