standard costing

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STANDARD COSTING

• A costing presentation on

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What is standard costing ?

• It is the setting up of standards for the
  purpose of cost control which is done while
  carrying out the production process by keeping
  in view these standards
• It helps us to analyse the reason for the non
  achievement of standards along with the say
  about whether it was in the hands of the
  management to be controlled

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What is a standard ?

• In context of costing, a standard is a
  predetermined cost which is calculated or zeroed
  upon after doing a relevant amount of technical
  analysis
• They are different from budgets which are set on
  past performances after adjusting them with the
  future trend

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Types of standard

• Ideal Standard -These standards are set on the
  assumption that the everyday factor will be most
  favourable to the organization
• Normal Standard -These standards are set on the
  assumption that operating conditions will be
  normal

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Types of standard

• Basic or Bogey Standard - These standards are
  used only when it is likely that standards will
  be constant or unaltered over a long period
• Current Standard - These standards are set up as
  per latest developments and current market
  senarios

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What is a variance ?

• A variance is the difference between the earlier
  set standard with the present production figures
  defined in a quantitative way
• The term variance comes from the term varied
  which is an expression to define the measure of
  non achievement of standards.

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Types of variance

• Material cost variance
• Labour cost variance
• Variable overhead variance
• Sales margin variance
• Sales turnover variance
• Fixed overhead variance

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Material Cost variance

• Is of two types-
• Material cost variance
• Material usage variance
• Material usage variance is of two types-
• Material mix variance
• Material yield variance

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Material cost variance
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