Managerial Accounting Chapter 8

Managerial Accounting Chapter 8 - Managerial Accounting...

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Managerial Accounting Chapter 8 – Standard Costs Standard Costs – Management by Exception Standard is a benchmark or norm for measuring performance - Quantity standards specify how much of an input should be used to make a product or service - Cost standards specify how much should be paid for each unit of input - Actual costs and quantities used are then compared to these standards o If either quantity or cost inputs depart significantly from the standards, management investigates the difference ( management by exception) o Standard Cost Card shows standard quantities and costs of the inputs required to produce a unit Ideal vs. Practical Standards Ideal Standards can be attained only under the best circumstances Practical Standards are “tight but attainable.” Allow for normal machine downtime and employee rest periods. Direct Materials Standards Standard Price per Unit – should reflect the final, delivered cost of the materials net of any discounts taken Standard Quantity per Unit
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