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The standard rate serves as a proxy for the variable portion of the predetermined overhead rate when calculating variable manufacturing overhead variances.
what is the standard rate?
The standard labor rate concept has two definitions, which are listed below. There may be a variety of standard labor rates in both situations, each one based on the general skill sets of the workers assumed to be performing the relevant work.
If there is only one standard labor rate, it should be determined by taking the fully burdened labor costs of the employees who are most likely to perform the related work and averaging them. The fully burdened cost of labor used in the creation of a good or the rendering of services is known as the cost basis standard labor rate.
When all relevant costs are taken into account, this data is used to calculate the profit made from a sale. Under a typical costing system, the cost of ending inventory and the cost of goods sold is also determined using this labor cost.
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