Q. 7. What Are the Similarities and Differences between Budgeting and Standard Costing?

Similarities Between Standard Costing and Budgetary Costing Basis of Difference Standard Costing Budgetary Costing Predetermined cost Standard costs are predetermined costs fixed according to estimates. Budgetary costs are also estimated costs. Advance cost Standard costs are estimated in advance and compared to actual costs. Budgetary costs are also estimated in advance and compared to actual cos…

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Q. 8. Standard Costing: Practical Problems and Solutions

This article presents three practical problems, along with solutions, for standard costing. Problem 1 The standard cost card shows the following details relating to the materials needed to produce 1 kg of groundnut oil: Quantity of groundnut oil required: 3 kg Price of groundnut oil: $2.5/kg Actual production data are given as follows: Production during the month: 1,000 kg Quantity of material use…

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Q. 9. How to Compute Various Overhead Cost Variances?

There are two types of overhead cost variances: Fixed overhead variance Variable overhead variance 1. Fixed Overhead Variance This is a cost that is not directly related to output; it is a general time-related cost. Specifically, fixed overhead variance is defined as the difference between standard cost and fixed overhead allowed for the actual output achieved and the actual fixed overhead cost in…

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Q. 10. How to Compute Sales Variances?

What Are Sales Variances? Changes in price and sales volume give rise to sales variances. There are two ways to calculate sales variances: Turnover method Profit method 1. Turnover Method Several variants of the turnover method exist, namely: (a) Value variance This is the difference between budgeted sales and actual sales. (b) Volume variance This is the variation represented by the total sales (…

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Management Accounting

Management Accounting: Definition Management accounting is concerned with preparing and presenting accounting information in such a way as to assist a firm’s management in designing policies, planning, and controlling the operations of the undertaking. Management Accounting: Explanation Management accounting uses both financial and cost information to advise managers in planning and controlling th…

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