Updating standard cost
To update the standard cost perform the following steps:1.
Run a report on the inventory balance taking the quantity available and multiply it by product unit cost field.
The standard cost volume variance applies only to fixed costs.
Fixed costs are allocated to inventory based on a standard overhead rate usually calculated at the beginning or year.
Accounting Seed recommends reviewing your product standard cost at least once every 3-12 months.
The volume variance can also be calculated by multiplying the difference in the hours by the standard fixed overhead rate.
The standard costing budget variance is (positive) favorable as the business spent 2,000 less than it expected to in the original budget.
The variance is the difference between the standard units and the actual units used in production, multiplied by the standard price per unit.
The standard costing variance is negative (unfavorable), as the actual units used are higher than the standard units, and the business incurred a greater cost than it expected to.Allowing for normal inefficiencies, the product is expected to require 0.50 hours of labor at a cost of 15.00 per labor hour.