Standards and budgets, Cost Accounting

Standards and Budgets

Budgets like you recall from the previous section, are simply plans for expected future performance expressed in quantified monetary terms. Therefore they are similar to standards for both cost levels and set performance for control reasons.  One would then conclude such standards and budgets are similar in principle though they differ in scope.  This variation is explained in the given two points as:

1. Standards are a unit concept that they apply to particular products, single operations or individual processes.

2. Budgets are concerned along with totals they lay the cost limits for functions and departments and for the firm as a complete.

What comes out clearly from the above is such standard cots are the "building blocks and cement" utilized to "build up" a structure referred to like a budget.  This is since a budget is the sum of the individual output units costs multiplied via the total output units desired like an example here

Budgeted Material Costs = (Standard Material Cost/Per Unit of Output) x (Number of output units/ desired)

Posted Date: 2/7/2013 5:28:23 AM | Location : United States

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