Standard Costs - Standard Costs The use of Cost Standards...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Standard Costs The use of Cost Standards Standard costs are predetermined expectations about how much a unit of input, a unit of output, or a given activity should cost. Standard costs are costs for direct materials; direct labor and manufacturing overhead that are predetermined or estimated Standard costs can be developed using various assumptions ex: Ideal , also called theoretical costs , attainable only under optimal conditions, that’s why they called perfection or maximum efficiency standard, often called tight standards. Currently attainable , also called practical or expected costs, challenging to attain, but attainable under normal conditions, they used in most standard costing systems and are incorporated into the flexible budget. Setting Standard Costs Several resources are used in determining standards for operations. These are: Activity analysis : Is the most accurate way of determining standard costs, if it is properly executed. It involves identifying and evaluating all the input factors and activities that are required to complete a job. Product engineers specify the components to be used in the manufacturing of a product. Industrial engineers analyze the procedures required to complete the manufacturing process. Management accountants work with the engineers to
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/16/2011 for the course MGMT 301 taught by Professor Hisham during the Spring '11 term at McMaster University.

Page1 / 2

Standard Costs - Standard Costs The use of Cost Standards...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online