16. Plant capacity used in hours.Real Life Examples : ISO – International Standards for Business, Government & Society. CMMI – Process improvement approach from Carnegie Mellon University, USA. NBA – an AICTE program for institution evaluation. What is Standard ?
17. A Standard Cost is a planned cost for a unit of product or service rendered. In the words of Backer and Jacobsen, “Standard cost is the amount the firm thinks a product or the operation of the process for a period of time should cost, based upon certain assumed conditions of efficiency, economic conditions and other factors.” Standard Costing
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20. The changes in manufacturing costs can be measured by taking basic standard, as a base standard cannot serve as a tool for cost control purpose because the standard is not revised for a long time. Basic Basic standard is established for a long period and is not adjusted to the preset conations. The same standard remains in force for a long period. These standards are revised only on the changes in specification of material and technology productions. It is indeed just like a number against which subsequent process changes can be measured. Basic standard enables the measurement of changes in costs.
21. The normal standard concept is theoretical and cannot be used for cost control purpose. Normal standard can be properly applied for absorption of overhead cost over a long period of time. Normal Normal standard has been defined as a standard which, it is anticipated, can be attained over a future period of time, preferably long enough to cover one trade cycle. The standard attempts to cover variance in the production from one time to another time. An average is taken from the periods of recession and depression.
22. It is presumed that conditions of production will remain unchanged. In case there is any change in price or manufacturing condition, the standards are also revised. Current standard may be ideal standard and expected standard. Current A current standard is a standard which is established for use over a short period of time and is related to current condition. It reflects the performance that should be attained during the current period. The period for current standard is normally one year.
23. We need to revise the standards which follow for better control. Even standards are also subjected to change like the production method, environment, raw material, and technology. Standards may need to be changed to accommodate changes in the organization or its environment. When there is a sudden change in economic circumstances, technology or production methods, the standard cost will no longer be accurate. Revision of Standards
39. From the following data given calculate, Labour cost variance Labour rate variance Labour efficiency variance Labour mix variance Labour yield variance Labour efficiency sub-variance Numerical
43. Variable overhead efficiency variance.Overhead Cost Variance Fixed Overhead Variance Variable Overhead Variance Numerical: Budgeted hrs. for month of march’99 = 180 hrs. Std. rate of article produced per hr. = 50 units Budgeted fixed overheads = Rs.2700 Actual production = 9200 units Actual hrs. of production = 175 hrs. Actual fixed overhead costs = Rs.2800 Calculate overhead cost variances.