Standard Costing: Techniques and Applications
Standard costing is a versatile technique used in various costing processes such as job costing and process costing. It involves determining standard costs, comparing them with actual costs, and analyzing variances. This method helps in cost estimation, price quotation, production planning, and cost control, serving as an improvement over historical costing practices. However, it also has limitations, including being expensive, time-consuming, and requiring high skill levels. Variance analysis is an essential component of standard costing, focusing on the differences between actual and standard costs in operational activities.
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Presentation Transcript
Semester IV Cost & Management Accounting II Chapter : STANDARD COSTING By By CHIRANJIT GHOSH CHIRANJIT GHOSH Assistant Professor Assistant Professor Department of Commerce Department of Commerce Saheed Saheed A Anurup nurup C Chandra handra M Mahavidyalaya ahavidyalaya
INTRODUCTION: Standard costing is a technique applicable in all type of costing such as job costing or process costing. This technique consists of (i) Determination of standard cost. (ii) Comparison of standard cost with actual cost. (iii) Measurement of variance & analysis of causes.
IMPORTANTS : Eliminating the shortcomings of historical costing. Facilitates in cost estimation. Facilitates in price quotation. Facilitates in production planning. Facilitates in cost control.
STANDARD COSTING Vs BUDEGTARY CONTROL Standard Costing Budgetary Control Involves estimating the costs of products and services. Is more intensive in nature. Is a projection of cost accounts. Requires standardization of products. Is a unit concept. Can not be operated in parts or elements. Standards are revised only when they are inappropriate for current operating conditions. Is concerned with all functional areas of the business and includes estimates of revenues as well as expenditure. Is more extensive in nature. Is a projection of financial accounts Does not necessarily involve standardization of products. Is a total concept. Can be operated in parts, section or departments. Budgets are periodically revised normally annually.
LIMITATIONS : Expensive and time consuming. Requirement of high skill & expertise. Not applicable for all businesses. Difficulty in segregation. Adversely affect on the morale & motivation.
VARIANCE ANALYSIS : Variance in Standard Costing refer to difference between actual and standard costs for specified areas of operational activity. Requirement of high skill & expertise. Not applicable for all businesses. Difficulty in segregation. Adversely affect on the morale & motivation.
