A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below. 6,700 DLHS Denominator level of activity Budgeted Overhead costs: Variable overhead cost Fixed overhead cost $36,850 $73,700 The following data pertain to operations for the most recent period: Actual hours Standard hours allowed for the actual output Actual total variable manufacturing overhead cost Actual total fixed manufacturing overhead cost 6,900 DLHS 6,566 DLHS $40,200 $72,740 The fixed manufacturing overhead budget variance for the period is closest to: Multiple Choice O $3,50 F O $3,67

Using predetermined standard costs for direct materials, direct labour, and industrial overheads, standard costing is an accounting method. The first cost management method is budgetary control, and the second is standard costing. Additionally, it is one of the most recent advancements in cost accounting.Standard costing, often known as standard cost accounting, is used to create budgets and predict future expenses. This type of cost accounting is generally used in the manufacturing sector since it is easier to assign expenses directly to the products being produced.

What are the advantages of standard costing?

1. Efficiency can be measured by contrasting standard costs with actual costs. Actual expenses that are equal to or less than standard costs demonstrate the effectiveness of the organisation.

2. Determining employee responsibilities: Specific standards are established for specific operations and sub-activities, which aids management in assessing whether or not employees are doing quality work.

3. Helpful in estimating production costs: Producers frequently quote and publicise production pricing in the marketplace even before production is complete.

4. Standardization of activities: Standards are established for different activities as a result of standard costing. The staff can work more productively as a result.

5. Beneficial for managerial tasks: Standard costing helps management to exert effective control over production activities and assists them in making judgments about the various cost components (e.g., materials purchases and wages).

6. Possibilities to raise manufacturing quality: In standard costing, quality and cost-effectiveness are prioritised. The enhancement of production quality is properly emphasised.

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