Chapter Briefer

Chapter 10
Standard Costing: A Managerial Control Tool

Important keys, Learning and Application in the Business setting

 Standard costs are essentially budgeted amounts on a per unit
basis.
 Quantity decision is determined how much in put should be used
per unit.
 Standard costing systems improve planning and control and even
facilitate product costing.
 Actual costing assigns actual manufacturing costs to products.
 Normal Costing assigns actual prime cost and estimated overhead
costs to products.
 Identifying standards and assessing deviation from standards,
business managers can trace areas where change or corrective
behavior is necessary.
 Business managers generally tend to have more control over the
quantity of an input used rather than the price.
 The materials price variance is often computed at the point of
purchase rather than issuance because it provides control
information earlier.
 Unit standard are used to build flexible budgets.

In identifying standards and assessing deviation from standards, business

managers can trace areas where change or corrective behavior is necessary
generally tend to have more control over the quantity of an input used rather than
the price.
 Chapter Briefer

Chapter 11
Flexible Budgets and Overhead Analysis

Important keys, Learning and Application in the Business setting

It is defined as a detailed plan for controlling overhead cost valid in

the firm’s relevant range activity. It shows revenues and expenses that should have
occurred at the actual level of activity and it also reveal variances due to good cost
control or lack of cost control.

 Spending variance, is the results from paying more or less than

expected for overhead items and from excessive usage of
overhead items while
 Efficiency variance is controlled by the managing the overhead
cost driver.
 Budget variance, results from paying more or less than
expected for overhead items.
 Volume variance is result from operating at an activity level
different from the denominator activity.

Business managers used flexible budgets and Overhead Analysis as a

planning tool to predict likely financial results at different levels of activity, it
helps in providing more control over cost.