3.11 Standard costing and variance analysis


Additional information

The purpose, advantages and disadvantages of a standard costing system.

The purpose will include understanding relevant terminology: standard cost, variance analysis.

Calculation and interpretation of variances.

Variances are:

  • materials (price and usage)
  • labour (efficiency and rate)
  • sales (volume and price).

The interrelationship between variances.


How to prepare statements and the use of accounting techniques to reconcile budgeted and actual figures.

Reconciliation could be of:

  • budget and actual cost
  • budget and actual profit.