Standard costs are used in the calculation of:

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Standard costs are used in the calculation of Pri

Answer

General guidance

Concepts and reason

Standard costing: Standard costing is the process by which expected cost is replaced by actual cost. The variance arising by the period is recorded in the books. Direct material cost, direct labor cost and manufacturing overhead costs are involved.

Direct Material cost: Direct material cost is the cost related to the purchase of the raw materials which are directly related with the production of the goods. It includes opening stock of materials, purchases, cost of purchases, and deducts the closing stock of materials.

Direct labor cost: It refers to the cost of providing wages to the workers who are directly associated with the production of goods or services rendered to the customers. The cost of direct labour includes the wages, payroll taxes, and all the benefits sponsored by the manufacturer.

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Manufacturing overhead costs: The costs, which do not relate directly with the manufacturing of products, are referred to as manufacturing overhead costs or indirect costs.

Fundamentals

Material Price variance: The change in the standard price stated and the actual price paid is referred to as material price variance.

Labor price variance: Labor price variance is the difference between actual price of labor and budgeted price of labor. If the actual price of labor is lesser than budgeted price of labor the variance is favorable. If the actual price is more than budgeted price the variance is unfavorable.

Material Quantity variance: The changes between the standard cost of standard quantity of materials for actual output and the standard cost of the actual material used.

Labor quantity variance: Labor quantity variance is the difference between actual quantity of labor and budgeted quantity of labor. If the actual quantity of labor is lesser than budgeted quantity of labor the variance is unfavorable. If the actual quantity is more than budgeted quantity the variance is favorable.

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Step-by-step

Step 1 of 2

Standard costing is the process by which expected cost is replaced by actual cost. The variance arising by the period is recorded in the books. Thus the standard costing is not used in the price variances, quantity variances, quantity and sales variances, price, quantity, and sales revenue.

Standard cost deals with both the actual cost and the expected cost; it will be used in the price and the quantity variance. The price and quantity variance involves both the material and the labor.

Step 2 of 2

Standard costing is the method to compare the actual cost with the expected cost, thus the standard cost is used both in the price and quantity variance.

Price and quantity variance is used in the calculation of standard cost.

The difference between actual price of materials and budgeted price of materials is the material price variance. Labor price variance is the difference between actual price of labor and budgeted price of labor. Material quantity variance is the difference between actual quantity of materials and budgeted quantity of materials. Labor quantity variance is the difference between actual quantity of labor and budgeted quantity of labor. Thus in both the price and quantity variance the actual is compared with the budgeted, if the actual is lessor than the budgeted then it is favorable, if the actual is higher than the budgeted than it is unfavorable.

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Answer

Price and quantity variance is used in the calculation of standard cost.


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