Topic: Standard costing and Variance Analysis

(a) Distinguish between Ideal standards and Practical standards, justifying with ONE reason, which one would bring more value to organizational planning.

(b) A variance is a disparity between a budgeted outcome and the actual outcome. Variances are typically calculated for each of the three (3) elements of cost, namely Direct Materials, Direct Labour and Manufacturing Overheads.

i. Identify ONE possible cause of variance for each of the following: direct materials and direct labour.

ii. Put forward a possible solution that could either minimize or eliminate the extent of the variances identified in part (i).