What are standard costs? Is a standard different from a budget? What happens if they are set too high or too low?

Part 1

Question 1

What are standard costs? Is a standard different from a budget? What happens if they are set too high or too low?

Question 2

Are favorable variances always good and unfavorable variances always bad? How should variances be interpreted?

Question 3

What is the difference between a standard and a budget?

Part 2

Question 1

Let's look at Case 9-26, Ethics and the Manager, in Chapter 9, page 414, and address and discuss the question there. What should Lance do in this situation and why? Have any of you had to deal with a similar situation in the workplace?

Question 2

What are ideal and practical standards? Which do you think is better?

Question 3

Let's consider the following situation: An examination of the cost records of the Williams Furniture Company reveals that the materials price variance is favorable, but the materials quantity variance is unfavorable by a substantial amount. What might this indicate?