Disposal Of Variances
There is difference of opinion among accountants as regards disposal of cost variance. However, the following methods are usually used to close the Standard Cost Variances:
i) Transfer to profit and loss account.
ii) Allocation of finished stock, work in progress, and cost of sales;
iii) Transfer to Reserve Account i.e., to carry forward to the next financial year and to be set off in the subsequent year of years
The standard cost is also incorporated in the accounting system so as to increase its statistical utility. The following are the methods for accounting based on standard costing.
i) Partial plan method,
ii) Single plan method and
iii) Dual plan method.