Question

1. What are the three primary reasons of using a standard cost system? In a business that routinely manufactures the same products or performs the same services, why are standards helpful?

2. What are ideal standards? What are currently attainable standards? Explain which standard is usually adopted and why.

3. Some people suggest that the direct labor rate variance is never controllable. Do you agree or disagree? Give reasons to support your answer.

Can you please answer all three questions please.

Answer 1

1.Standard cost syatem is very important for almost every entity there are many reasons of using it,some of then are

•It helps in the cist saving in record keeping if the entity

•It help to a great extent to reduce the production cost

•Helps in managerial planning and decision making with creating an standard

2.Ideal standard is those standard that are achieved with full efficiency in best possible way and this term is basically used in standard Costing.

Currently attainable standard means the achievable standard that can v achieve but certain conditions applied to it which affects the controllable standards.

Standard Costing should be adopted because by using it the variance that is basically the difference between standard and ideal production and can further be useful as measure chek as targeted or some other division can v taken

3.It is absolutely correct that direct labour rate variance is never controllable in nature as wages paid to labour is fixed and skilled labour charges more wages and the overtime charges is also given if labour works for extra hour so these type of costs are unavoidable in nature

Labour rate variance=(acctual hours worked*acctual rate)-(acctual hr worked*standard rate)