Standard costs
3 important questions on Standard costs
How to calculate total standard cost per unit
Formula: standard Quality or hours X standard price or rate = standard cost per unit
How to calculate Labour Quantity Variance (LQV)
Labour Quantity Variance (LQV) [time/DL hours] —>
(Actual Hours x Standard Rate) - (Standard Hours x Standard Rate)
(Actual Hours x Standard Rate) - (Standard Hours x Standard Rate)
Explain variances + formula for Total variance
Variances are differences between total actual costs and total standard costs.
Total Variance = Material variance + Labour variance + Overhead variance
Total Variance = Material variance + Labour variance + Overhead variance
- Actual costs < Standard costs = Favourable variance
- Actual costs > Standard costs = Unfavourable variance
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