STANDAD COSTING QUES
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Accounting and Financial Management for Bankers — JAIIB.
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What is standard costing?
Standard costing is a cost control technique where predetermined costs (standards) are set for materials, labour, and overheads, and actual costs are compared against these standards to identify variances.
What is a current standard in standard costing?
A standard set for current period conditions and prices.
What is a standard cost?
A standard cost is a predetermined cost calculated under specific assumed conditions of efficiency, representing the expected cost of producing one unit of output.
What is the formula for Material Cost Variance (MCV)?
MCV equals Standard Cost minus Actual Cost of material.
What is a variance in the context of standard costing?
A variance is the difference between the standard (predetermined) cost and the actual cost incurred; it can be favourable (actual < standard) or adverse/unfavourable (actual > standard).
What does a favourable Material Price Variance indicate?
Actual price paid was less than the standard price.
What is a favourable variance?
A favourable variance arises when actual cost is less than the standard cost, or actual revenue is more than standard revenue, indicating better-than-expected performance.
What does an adverse Material Usage Variance indicate?
More material was used than the standard quantity allowed.
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