Lesson 1133 of 1524
Standard Costs and Variances
A favorable variance is when the actual price or quantity is less than the standard amount
Practice this chapterA favorable variance is when the actual price or quantity is less than the standard amount An unfavorable variance is when the actual price or amount is greater than the standard amount
There are two components to material variances: the direct materials price variance and the direct materials quantity variance There are two labor variances: the direct labor rate variance and the direct labor time variance
standard cost — cost expectation for price paid and amount (quantities) used. variance — difference between standard and actual performance. standard — expectation for a component used in production. direct labor rate variance — difference between the actual rate paid and the standard rate that should have been paid based on the actual hours worked.
Worked example
What does “standard cost” mean in Standard Costs and Variances?
- 1Use the wording this chapter gives for standard cost.
- 2The book says: cost expectation for price paid and amount (quantities) used.
- 3Do not use the meaning of variance. That term means difference between standard and actual performance.
Result: cost expectation for price paid and amount (quantities) used
Why. That is the meaning this chapter gives for standard cost.
Do not swap standard cost and variance. standard cost means cost expectation for price paid and amount (quantities) used. variance means difference between standard and actual performance.
Practice margin
This chapter
A fresh set from this chapter only. Choose 10 or 20. Multiple choice and fill-in, with no repeat inside the set.