Standard cost is the cost that is expected to incur while producing goods or providing services.
- It is also called as budgeted cost or planned cost.
- Its main objective is to ascertain the deviation between standard cost and actual cost.
Features of Standard Cost:
- It is predetermined cost.
- It is a future cost since it is expected to take place in future.
- It is estimated on the basis of past costing information.
- They serve as a reference point to compare actual costs and standard cost to identify variances.
Concept of Standard Costing:
Standard Costing is a cost control technique that involves setting standard costs for products, services, or operations, and then comparing these standards cost with the actual costs incurred to measure the variances.
- It helps in performance evaluation, cost control, and managerial decision-making.
Features of Standard Costing:
- In standard costing, cost for all factors are pre-determined in advance.
- The standards are set based on the past records and performance.
- It compares actual costs with standard costs to identify deviations and their causes.
Applications of Standard Costing:
- It is used to measure the efficiency of production.
- It is used to measure the performance of each segment.
- It is used to identify and measure the variances between standards and actuals.
- It is used to prepare budgets and set financial goals based on cost standards.
- It helps in monitoring and controlling costs.