Establishing Cost Standards Homework Help
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What are Cost Standards?
Standard costs are the values allotted to a process or product prior to its manufacturing. They are the basis of cost to be compared with the actual or target costs. There is a 4-step process described in our establishing cost standards homework help article to define how the standard costs are established.
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Procedure for Establishing Cost Standards
The following steps allocated in this establishing cost standards homework help article describe the hierarchy of establishing cost standards.
1. Establishment of cost centres: a cost centre can either be a location or a person or any equipment over which cost is about to be estimated. They are basically, as our establishing cost standards homework help article says, used for purpose of cost control.
2. Classification and codification of accounts: the purpose of collection and analysis is fulfilled by utilizing the account systems. By the help of codes and symbols, these accounts are maintained and studied.
3. Determination of type of standard: in our establishing cost standards homework help article we define this stage as the acceptance of management over which the standard cost is determined. There are usually four kinds of standard costs
a. Ideal standard
b. Expected standard
c. Normal standard
d. Basic standard
the people involved in this setting of standards are
a. Purchase manager
b. Personal manager
c. Production manager
d. Cost accountant
e. Time and motion study engineer
4. Setting of standards: there are lot of standards to be set in the area of direct material like its quantity, price direct labor etc. after allotting all the fixed overheads to it the cost standard is set.
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