Chapter 8
Standard Costs
McGraw-Hill /Irwin © The McGraw-Hill Companies, Inc., 2007
, Standard Costs
Standards are benchmarks or “norms”
for measuring performance. Two types
of standards are commonly used.
Quantity standards Cost (price)
specify how much of an standards specify
input should be used to how much should be
make a product or paid for each unit
provide a service. of the input.
8-2
, Standard Costs
Deviations from standard deemed significant
are brought to the attention of management, a
practice known as management by exception.
Standard
Amount
Direct
Material
Direct Manufacturing
Labor Overhead
Type of Product Cost
8-3
, Exh.
10-1
Variance Analysis Cycle
Take
Identify Receive corrective
questions explanations actions
Conduct next
Analyze period’s
variances operations
Prepare standard
Begin
cost performance
report
8-4
Standard Costs
McGraw-Hill /Irwin © The McGraw-Hill Companies, Inc., 2007
, Standard Costs
Standards are benchmarks or “norms”
for measuring performance. Two types
of standards are commonly used.
Quantity standards Cost (price)
specify how much of an standards specify
input should be used to how much should be
make a product or paid for each unit
provide a service. of the input.
8-2
, Standard Costs
Deviations from standard deemed significant
are brought to the attention of management, a
practice known as management by exception.
Standard
Amount
Direct
Material
Direct Manufacturing
Labor Overhead
Type of Product Cost
8-3
, Exh.
10-1
Variance Analysis Cycle
Take
Identify Receive corrective
questions explanations actions
Conduct next
Analyze period’s
variances operations
Prepare standard
Begin
cost performance
report
8-4
