Standard Costing and Variance Analysis Standard cost systems set budgets for the materials, labor, and factory overhead used by a manufacturer to produce its product. Deviations from these standards are reported as variances.. Standards-variance analysis cost control system can be applied to non-manufacturing businesses, provided that they use repetitive activities to produce a common product or service. Based on real-life experience, describe and discuss a non-manufacturing (service) business that could benefit from the use of standards. Also explain how standards would help that business control its operations.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Standard Costing and Variance Analysis
Standard cost systems set budgets for the materials, labor, and factory
Standards-variance analysis cost
Based on real-life experience, describe and discuss a non-manufacturing (service) business that could benefit from the use of standards. Also explain how standards would help that business control its operations.
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