Standard Costing Essay

7331 Words Aug 22nd, 2013 30 Pages
Sr no : Name 1. : Meaning and Introduction of Standard costing 2. : CIMA { } 3. : Advantages of Standard costing 4. : Limitation of standard costing 5. : Types of standard costing 6. : Examples of standard costing 7. : Variance analysis 8. : Types of analysis 9. : Refferences 10. : Conclusion

Standard Costing and Variance Analysis

Standard Cost
The word "Standard" means a "Yardstick" or "Bench Mark." The term "Standard Costs" refers to Pre-determined costs. Brown and Howard define Standard Cost as a Pre-determined Cost
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(1) Standard Costing is a projection of cost accounts.
(2) Standard costing is not used for the purpose of forecasting.
(3) Budgets are estimated costs. They are "what the cost will be."
(4) Budget can be operated with standards.
(5) In budgetary control variances are not revealed through the accounts.
(6) Budgets are prepared on the basis of historical facts and figures. Advantages of Standard Costing 1. Standard Cost are the "Norms" or "what cost should be." 2. Standard Costing cannot be used without budgets 3. Under standard costing variances are revealed through different accounts. 4. Standard cost are planned and prepared on the basis of technical estimates.
The following are the important advantages of standard costing :
(1) It guides the management to evaluate the production performance.
(2) It helps the management in fixing standards.
(3) Standard costing is useful in formulating production planning and price policies.
(4) It guides as a measuring rod for determination of variances.
(5) It facilitates eliminating inefficiencies by taking corrective measures.
(6) It acts as an effective tool of cost control.
(7) It helps the management in taking important decisions.
(8) It facilitates the principle of "Management by Exception."
(9) Effective cost reporting system is possible.
Limitations of Standard Costing
Besides all the benefits derived from this system, it has a

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