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Costing & MIS

Costing & MIS

Costing is an important subtopic of cost accounting. Standard costs are usually associated with a manufacturing company's costs of direct material, direct labor, and manufacturing overhead.

If we assume that a company uses the perpetual inventory system and that it carries all of its inventory accounts at standard cost (including Direct Materials Inventory or Stores), then the standard cost of a finished product is the sum of the standard costs of the inputs:

Costing & MIS

Direct material

Direct labor

Manufacturing overhead

Variable manufacturing overhead

Fixed manufacturing overhead

Usually there will be two variances computed for each input: