Aqa Accounting- Standard Costing And Variance Analysis

Front 1

Define standard costing.

Back 1

Standard costing sets per-determined/budgeted cost for materials, labour and overheads in advance of production

Front 2

What are the three main benefits of standard costing?

Back 2

1. To help with decision making
2. To assist in planning.
3. As a means of controlling costs.

Front 3

What are the four main disadvantages of standard costing?

Back 3

1. The standard cost of making a product or providing a service may be set incorrectly.
2. The standard cost can quickly go out-of-date when there is fluctuations in prices of materials, labour and overheads.
3. The uses of a variance may be more complex than a variance from the standard cost.

Front 4

Define a variance.

Back 4

A variance is the calculated difference between the standard cost/expected revenue and the actual cost/revenue.

Front 5

Define materials variance and give the calculation.

Back 5

Materials variance is the difference between the standard cost of material and the actual cost of material for the actual production.
(standard quantity x standard price) - (actual quantity x actual price)

Front 6

Name the two sub-variances of material variances and their calculation.

Back 6

Material price variance= actual quantity x (standard price - actual price)
Material usage variance= standard price x (standard quantity - actual quantity)

Front 7

Define labour variance and give its calculation.

Back 7

Labour variance is the difference between the standard cost of labour and the actual cost of labour for the actual production.
Labour variance= (standard hours x standard rate) - (actual hours x actual rate)

Front 8

Name the two sub-variances of labour variances and give their calculation.

Back 8

Labour rate variance= actual labour hours x (standard rate - actual rate).
Labour efficiency variance = standard rate x (standard hours - actual hours).

Front 9

Define sales variance and give its calculation.

Back 9

Sales variance is the difference between the standard sales revenue and the actual sales revenue for the product/service.
(standard quantity x standard rate) - (actual quantity x actual rate)

Front 10

Name the two sub-variances of sales variances and give their calculation.

Back 10

Sales volume variance = Standard price x (standard quantity - actual quantity).
Sales price variance = Actual quantity x (standard price - actual price)

Front 11

What is the difference between an adverse variance and a favourable variance?

Back 11

A favourable variance is where the actual cost is less than standard cost.
An adverse variance is where the actctual cost is more than standard cost.

Front 12

What are the three reconciliation statements that variances can be brought together in?

Back 12

1. A profit reconciliation statement.
2. A cost reconciliation statement.
3. A sales reconciliation statement.

Front 13

What two variances could the use of cheaper materials of low quality lead to?

Back 13

1. A favourable price variance.
2. An adverse usage variance.

Front 14

What two variances could the use of higher grade staff lead to?

Back 14

1. A favourable labour efficiency variance.
2. An adverse labour rate variance.

Front 15

What two variances could result if there is a lower selling price?

Back 15

1. An adverse sales price variance.
2. A favourable sales volume variance.

Front 16

How are adverse and favourable variances treated in each reconciliation statement?

Back 16

In the profit reconciliation statement cost variances are added while adverse variances are deducted. In the cost reconciliation statement favourable cost variances are deducted while adverse variances are added. In the sales reconciliation statement favourable sales variances are added while adverse sales variances are deducted.