Establishment of standard cost is a backbone of working of all business firms that deal with standard products. This very fact calls for all business students to learn the skill compulsorily. With an aim to make students learn it efficiently, a number of home assignments are given to students by the universities they study in. To complete those assignments, one needs to calculate carefully all the components of standard cost homework answers.
How to deal with the concepts?
To calculate here means to take into account and understand carefully all the components of establishment of standard costs and the significance of each. Amongst the various components of establishment of standard costs to a product, collection of information on the basis of which cost is estimated, and variance analysis are the most important ones. The other components are the merits and demerits of the process, the different types of standards that are generally estimated and the tolerance limit.
Preparation of standard cost, the foremost step
Collection of data is the foremost procedure a company has to follow in the standard costing process. This data includes the information concerning a product’s past performance and is collected from various sources available in the market as well as within the company itself. It seems to be a really tiresome task, and so it is.
A business student needs to enumerate all the points encompassed within the whole task of data collection if he wants to prepare a good home assignment considering all the components of standard cost homework answers. Preparation of standard costs is then done based on the collected data. The process includes establishment of certain meaningful standards by the executives of a firm through vigorous discussions.
Basic requirements need not be forgotten to account for
Every company that deals with standard products have to carry out standard costing mandatorily as by means of this procedure only, such firms are able to evaluate their performance in the past and thereby, plan ways to improve it in future. There are some basic facilities that a firm requires to avail itself of in order to carry out standard costing. These requirements are also one of the various components to be considered by the students while working on their homework.
The requirements include the availability of a facility to calculate the variances within regular time intervals and a system to measure and thereby mutually compare the actual and standard costs. Also, the company must possess skilled executives who can devise meaningful standards.
Understanding the aim of estimating standard costs will be of help
If you want to perform an action flawlessly, you need to understand the cause behind performing it. Likewise, to establish standard costs efficiently, you need to know as well as understand the purpose of doing it more deeply. Similarly, students too have to understand one of the crucial components of standard cost homework answers, that is, the main purpose of companies behind carrying out this process, which is overall benefit of the firm.
Knowledge of the basis of setting standard costs is most crucial
The major basis on which standard costs are set is the data collected from various sources regarding the performance of a product. Generally, standard costing is done on the basis of consideration of company’s technical aspects.
However, the major issue that arises while carrying out this set up is the issue of rigidity or tightness of standards, which may range from very slack like achieving regularity in tasks to very firm such as attainment of complete perfection in an aspect.
Various types of standards will help you decide
There are three general types of standards depending on which costs are assigned to products.
- Normal standards are having two subtypes, namely ideal and target standards. Ideal standards are the ones that aim at achieving maximum efficiency with the minimum possible input and no time loss. However, such a standard is not practically feasible. On the other hand, target standards are the ones that issue allowances for a certain amount of time waste and are planned to attain the decided goals within an estimated period.
- Basic standards laying greater emphasis on the past rather than future, which makes them less realistic because of the continuously changing situations of the firm.
- Currently, attainable standards being the most practical ones amidst allowing maximum flexibility and allowances for normal spoilage and unavoidable situations that may be faced by the company. Also, these standards take into account the present operating conditions.
While enumerating all the components of standard cost homework answers, one often comes across the different types of standards that can be worked out for a product. In that situation, one needs to analyze the various aspects of the performance of product in the given questions and thereby, decide accordingly which type of standard should be set.
Variance limits are one of the most significant aspects
Evidently, the actual performance of a firm does not match the standard performance most of the times. This variation of actual performance from the estimated one is what we call as variance, and its magnitude is called variance or tolerance limit. Tolerance limit is basically of two types, namely random ones, that arise from chance happenings such as machine breakdown and are thus, uncontrollable; and significant ones, that can be controlled.
Merits and demerits of standard costing are to be considered as well
Apart from all the components discussed above, the one that cannot be avoided is the existence of certain merits and demerits of the process. The merits of the process must be quite clear by now, but the demerits have not been talked about yet. The task of establishment of standard costs has some demerits too, like the difficulty faced in application of the standard costs in practice, the rigidity attained by the established standards which hinder them to change with time, etc.
This was an elucidation of various components of standard cost homework answers. While writing answers for standard cost homework, one needs a deeper insight into each of the components. Moreover, to do any home assignment requires a lot of hard work in understanding the concept given in the assignment properly. In case one finds it difficult to get all the details clearly, help of various homework help services available on the web can be sought.