Standard costing and budgetary control , Managerial Accounting

STANDARD COSTING AND BUDGETARY CONTROL

In practice, the terms standard cost and budgeted cost might be used interchangeably. Whereas it is possible to have budgeting without standard costs, it is not possible to have standard cost system without total cost budgeting system.

Standard costing and budgetary control are interlinked items. Once standard cost has been determined and is relatively easy to compute budgets for production costs and sales and, when actual figures differ from expected standards, to calculate variances, to provide a basis for control reporting.

A standard cost is an average predictable unit cost. It is set using the best available estimates and cannot be expected in practice that actual results will conform to standard. Variances must therefore be expected to fluctuate randomly within normal limits. Such random fluctuations need no investigation and tolerance limits are set (investigate only those variances which exceeds Sh.x or y% of the standard cost).

Standard costing is appropriate in any situation where the same resources are used over and over again in the same way. It is therefore particularly appropriate for manufacturing businesses producing large numbers of identical items, especially where the same operations are combined in different ways to produce different products. It also has applications in service businesses that involve repetitive operations.

Installing a standard costing system entails designing an information system that can collect and analyze details about activities in such a way that the standards can be set and applied. In effects this means collecting quantitative data about the use of resources.

Posted Date: 12/7/2012 8:25:29 AM | Location : United States







Related Discussions:- Standard costing and budgetary control , Assignment Help, Ask Question on Standard costing and budgetary control , Get Answer, Expert's Help, Standard costing and budgetary control Discussions

Write discussion on Standard costing and budgetary control
Your posts are moderated
Related Questions
Dynamic programming It is an extension which finds solutions to problems involving a number of decisions which have to be made sequentially. For example, the amount of a produc

Service time-probability distribution curve A common example is that service times follow an exponential probability distribution i.e. y=e -x Service channels - t

Your financial advisor has recommended that you invest into your Roth Individual Retirement Account (Roth IRA) the sum of $5,000. If you put in $5,000 today, what will this investm

solutions for (POS) slow printing of sales tickets and unpredictable action of cash drawers. when credit approvals delayed the checkout process or when the computer was down, thus

Under this method, approximated profit is calculated depends on transactions of the ensuing period. Afterward, decrease or increase in working capital is determined adjusting the e

LEARNING CURVE THEORY The first time a new operation is performed both workers and operating procedures are untried but as the operation is replaced the workers becomes more fa

Loan Syndication : There are two ways of syndication as: direct lending and through participation. - Direct Lending: regarding "direct lending" all the lenders sign the loa

GRAPHICAL METHOD Graphical methods can be used in games with no saddle points and having pay off m X 2 or 2 X n matrix. The aim is to substitute a much simpler 2 X 2 matrix for

Granger products had the following transactions for the just completed month. The company had no beginning inventories. a)$75,000 in raw materials were purchased for cash. b) $7

Types of Factoring The factoring facilities can be largely categorized in four groups that are as follows: 1)   Full service non-recourse (old line) 2)   Full service rec