Standard costing involves setting cost standards for business activities and analyzing actual costs against these standards. Variances represent the differences between actual and standard costs, and can be favorable if actual costs are lower or unfavorable if higher. Variances are classified into categories like direct material, labor, and overhead variances.

1. Standard Costing
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2. What is standard costing?
Standard costing deals with setting up of
cost standards for different activities and
their periodic analysis.
Used by businesses around the globe for
budgetary planning and preparation of
financial statements.
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3. Learn from India’s Best Professors
Variance
The difference between the actual cost and
standard cost is termed as variance.
 If actual cost is below the standard cost, then
it is termed as favorable variance.
 If actual cost surpasses the standard cost,
then it is called unfavorable variance.

4. Variances can be classified into:
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 Direct Material Variance
 Material Cost Variance
 Material Price Variance
 Labour Variance
 Labour Rate Variance
 Labour Efficiency Variance
 Overhead Variance
 Fixed Overhead Variance
 Variable Overhead Variance

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