Management Accounting
Standard Costing
Standard costing questions test your ability to calculate material, labour, and overhead variances, explain their causes, and evaluate non-financial factors. A high-mark topic requiring both numerical accuracy and analytical skill.
Always label variances as Favourable (F) or Adverse (A). Learn the formulas precisely — a wrong formula loses all subsequent marks. For evaluation questions, always discuss non-financial factors alongside the variance analysis.
Key Concepts to Revise
Direct Material Variances
Price: (Standard price – Actual price) × Actual quantity
Usage: (Standard qty – Actual qty) × Standard price
Direct Labour Variances
Rate: (Standard rate – Actual rate) × Actual hours
Efficiency: (Standard hrs – Actual hrs) × Standard rate
Fixed Overhead Variances
Expenditure: Budgeted fixed overhead – Actual fixed overhead
Volume: Splits into capacity and efficiency sub-variances
Sales Variances
Price: (Actual price – Standard price) × Actual volume
Volume: (Actual – Budgeted volume) × Standard price
F vs A Classification
Favourable = better than standard (costs lower / revenue higher). Adverse = worse than standard. Always state which.
Non-Financial Factors
Staff morale, quality implications, supplier reliability, and the appropriateness of standards set — essential for top evaluation marks.