How does a standard cost accounting system work

1. How does a standard cost accounting system work, and why is it valuable to management

2. What is the difference between the standard cost and the actual cost of production?

3. What is a “standard”? Give some examples such as those appearing in the chapter introduction.

4. How are standards for materials and labor costs determined?

5. What is a variance?

6. Is a favorable variance “good” and an unfavorable variance “bad”? Explain.

7. When are variances usually recorded in the general journal?

8. Are actual costs or standard costs charged to Work in Process in a standard cost system?

9. What two factors must be considered when breaking down a variance into its components?

10. What might cause the following materials variances? a. An unfavorable materials price variance.

b. A favorable materials price variance.

c. An unfavorable materials quantity variance.

d. A favorable materials quantity variance.

11. What might cause the following labor variances?

a. An unfavorable materials price variance.

b. A favorable materials price variance.

c. An unfavorable materials quantity

d. A favorable materials quantity variance

12. What might cause the following labor variances?

a. An unfavorable labor rate variance.

b. A favorable labor rate variance.

c. An unfavorable labor efficiency variance.

d. A favorable labor efficiency variance

13. Is it possible that a variance of one type might be partially or fully offset by another variance? Explain.

14. If, in a given period, the total actual cost of all materials used is exactly the same as the standard cost so that no net variance results, should the data be further analyzed? Explain.