Managerial: Accounting

Focus On

STANDARD COSTING SYSTEMS

After studying this focus unit, you should be able to meet the following learning objectives (LO).

1. Understand how a standard costing system is used to value inventory and control costs.
2. Calculate the fixed overhead volume variance.

The Pitch

Kelly MacGregor, Durable Zipper Company's inventory accountant, was ready to pull her hair out. Keeping up with inventory costs was a real challenge, since actual costs could fluctuate on a daily basis. She always had to try and figure out which zippers were made with which batch of inputs so that costs would be properly recorded. Once the zippers were finished and sold, it was an even greater challenge to get the correct costs recorded in cost of goods sold.

“There has to be a better way of recording these costs in our accounting records,” Kelly lamented. “How do companies that are larger than us, with more inputs and products, do it?”

Standard Costing Systems

GUIDED UNIT PREPARATION

Answering the following questions while you read this focus unit will guide your understanding of the key concepts found ...