You started your own construction business and need to determine the cost of materials used to build one house, and how many materials you will need to do so.Where would you begin to determine the standard price and quantity needs to build one house?What would produce a difference between the standard cost to build a house and the actual cost? What would cause a favorable outcome? What would cause an unfavorable outcome?What action might your company take if you had an unfavorable total direct materials cost variance?

Standard costing is a system of performance measurement, facilitating management by exception…

Answered: You started your own construction…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 13E

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You started your own construction business and need to determine the cost of materials used to build one house, and how many materials you will need to do so.

Where would you begin to determine the standard price and quantity needs to build one house?
What would produce a difference between the standard cost to build a house and the actual cost? What would cause a favorable outcome? What would cause an unfavorable outcome?
What action might your company take if you had an unfavorable total direct materials cost variance?

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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