Chapter 25, Problem 18Q

(a)

To determine

Reporting of Variances: The variance which is the difference arising between the actual costs and the estimated costs should be reported to the management as soon as possible so that corrective actions can be taken at earliest. The reporting of variances is done on either weekly or monthly basis.

Standard Costs: Standard costs refer to those costs which are estimated as a standard so that it can be used to compare with the actual costs. To find the variances, the actual costs are compared with the standard costs.

To explain: The reporting of variances in income statement prepared for management.

(b)

To determine

To explain: The use of standard costs in preparing the financial statements.