Chapter 9. STANDARD COSTING, FLEXIBLE BUDGETS AND VARIANCE ANALYSIS. Setting standards and next steps. Standards are performance benchmarks that allow comparisons against actual performance.
STANDARD COSTING, FLEXIBLE BUDGETS AND VARIANCE ANALYSIS
3. Reporting. Standard costs simplify calculating profits and valuing inventories.
(am - sm) × AV = (£0.50 - £1.00) × 110,000 units = 0.5 × 110,000 = £55,000U
DrinkNat could expect using 4,400 MH.
Using the standard allocation rate of £7.50/MH (based on dividing £30,000 budgeted VOH and 4,000 MH), as done on you will allocate:
4,400 MH × £7.50/MH = £33,000 VOH Check that this figure is in DrinkNat’s flexed budget (Table 9.5).
£31,000/5,000 MH = £6.20/MH – lower than the standard.
Research persistently reports the popularity of standard costing and variance analysis.