For All Things Accounting.

Standard Costing and Variance Analysis

Checked for updates, April 2022.
7 Lessons
Image link to What is Standard Costing
Lesson 1

What is Standard Costing?

Standard costing is a cost accumulation method that makes use of predetermined amounts known as standard costs. The use of standard costs has several advantages.
Image link to Standard Costs
Lesson 2

Standard Costs

Standards refer to the acceptable measures of performance. Standard costs are based on past experiences, market rates, industry standards, or other relevant information.
Image link to Direct Materials Variance
Lesson 3

Direct Materials Variance

Standard costing allows comparison between actual costs incurred and budgeted costs based on standards. The direct materials (DM) variance is computed by comparing the total actual cost and total standard cost of the raw materials.
Image link to Direct Labor Variance
Lesson 4

Direct Labor Variance

The direct labor (DL) variance is the difference between the total actual direct labor cost and the total standard cost. The direct labor variance may be split into: direct labor rate variance and direct labor efficiency variance.
Image link to Factory Overhead Variance
Lesson 5

Factory Overhead Variance

Standard costing allows management to determine and analyze areas that deviate from established standards. This article shows a rundown of the different variances used in analyzing variable and fixed factory overhead.
Image link to Two Way Analysis
Lesson 6

Two-Way Analysis of Factory Overhead Variance

The 2-way analysis of factory overhead shows the difference between the total actual and total standard FOH costs split into two components: budget variance and volume variance.
Image link to Three Way Analysis
Lesson 7

Three-Way Analysis of Factory Overhead Variance

The 3-way analysis shows the difference between the total actual factory overhead and total standard factory overhead costs split into three components: spending variance, efficiency variance, and volume variance.
Chapter Contents

One of the most important concepts in managing costs is the establishment of standards and analyzing the variances. With the use of predetermined costs, known as standard costs, we can compare and analyze actual results versus expectations based on the set standards

This chapter defines and discusses the important concepts of standard costing. It also takes a look at the different variances and walks us through how to compute and analyze each variance.

Like and share!
Web link
APA format
Standard Costing and Variance Analysis (2022). Accountingverse.
Next Chapter
Previous Chapter
Course Outline
> <
A c c o u n t i n g v e r s e
Your Online Resource For All Things Accounting
Based on international financial reporting standards,
and with references to US or local GAAP as needed
Copyright © 2010-2022