a) In a standard costing system what are the manufacturing inputs? b) In a normal costing...

a) In a standard costing system what are the manufacturing inputs?

b) In a normal costing system what are the manufacturing inputs?

Expert Solution

a) In standard costing manufacturing inputs are standard material, labour and overhead. But in this costing system we calculate standard cost for actual ouput based on budgets we prepare. It i a way for manufacturers to know the variance in standard and actual cost. Variance can be of two types favourable unfavourable. In favourable variance the standard costs are less than actual cost whereas in unfavourable variance standard costs are more than actual cost. Example of standard cost- product a used 3 units of raw material whereas standard usage was 2 units of raw material, here 2 units is standard and 3 units is acual usage. So, we can use this to calculate material variance.

b) In normal costing manufacturing inputs are actual material, labour and overhead. So, here we use actual costs and actual usage of inputs. This costing gives us the actual cost figures. Normal costing figures facilitates comparison with standard costing and enables calculation of different variances. Normal costing figures facilitates preparation of financial statements. Here every costs are recorded on basis of what we actually pay. Example- product is prepared using 2 units of raw material @ $ 2 per unit. So, actual material cost for product is $ 4.

ekkarill92 answered 2 years ago

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