ACCT 2101 Chapter Notes - Chapter 11: Direct Labor Cost
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Standard costs: offer the following advantages to a organization. They promote greater economy (cid:271)y (cid:373)aki(cid:374)g e(cid:373)ployees (cid:373)ore (cid:862)(cid:272)ost (cid:272)o(cid:374)s(cid:272)ious. (cid:863) They contribute to management control by providing a basis for the evaluation of cost control. They are useful in highlighting variances in management by exception. They simplify the costing of inventories and reduce clerical costs. Setting standard require input from all persons who have responsibility for costs and quanitites: can be set at 2 levels. Ideal standards optimum levels of performance: normal standards efficient levels of performance that are attainable under expected operating conditions, establish standard cost, must establish standards for each manufacturing cost element, dm, dl, moh. Standard for each element is direived from a consideration of the standard price to be paid and the: direct materials standard quantity to be used. Price stanard is the cost per unit of dm that should be incurred: based on the purchasing departments best estimate of the cost of raw materials.