When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is unfavorable.
A standard cost is also referred to as the cost that "should be," a predetermined cost, a projected future cost, an expected cost, a budgeted unit cost, or an anticipated cost. The yearly profit plan and operating budgets of a manufacturer frequently include standard costs as a key component.
The inventory and cost of products sold accounts in a standard cost system will contain the standard expenses of the manufacturing activities. There may probably be some changes because the company has to pay its suppliers and manufacturing staff according to the real costs incurred.
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