Describe the nature of standard costing, Managerial Accounting

Assignment Help:

Describe the Nature of standard costing

The system of standard costs (standard costing) is a management technique of using predetermined costs (standard costs) for evaluating performances and actual costs. To fine out whether or not costs incurred deviate from costs that should have been incurred the difference between actual costs and standard costs is calculated.

Cost variance is the difference between standard costs and actual cost. The calculation of variance indicates to management whether costs are under control or not. A variance can be favorable or unfavorable (adverse). an unfavorable variance is obtained when actual cost are more than standard costs. This requires remedial action to improve the performance. A favorable variance occurs when actual costs are less than standard costs.

Once a variance has been calculated it needs proper management attention; it should be analyzed and explained. Significant variance should be reported to the appropriate levels of management for corrective actions. Depending on the feedback from the analysis remedial actions should be taken. If it is found that standards were inaccurately set they should be revised. It must be remembered that a mere calculation of variance does not imply control; control of costs lies in the corrective actions taken by management on the basis of variance analysis.

 


Related Discussions:- Describe the nature of standard costing

Identify which of the entities listed should record, Frontier Sports sells ...

Frontier Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Frontier Sports is owned and operated by Wally Schnee, a well-known sports enthus

Illustration of short-term decisions, Illustration of short-term decisions ...

Illustration of short-term decisions These are, to a significant extent, determined by the excellence of the firm's long-term decisions. Illustration of short-term decisions in

Show the process of pricing during introduction, Q. Show the process of Pri...

Q. Show the process of Pricing during introduction? Pricing during introduction: in pricing a new product generally two kinds of strategies are suggested viz. a) Skimming p

What is incremental budgeting, Incremental budgeting Incremental budget...

Incremental budgeting Incremental budgeting uses a budget prepared using a last period budget or actual performance as a base with incremental amount asses for the new budget p

Determine abc system and service organizations, ABC System and service orga...

ABC System and service organizations The ABC system has been taken up as applied to a manufacturing organizations with the same efficiency. One basic characteristic of service

What are the stages in the performance budgeting, Stages in the performance...

Stages in the performance budgeting The stages in the performance budgeting is enumerated as follows: 1) Establishment of goals objectives and policies: data collection revi

Accounting profit, Accounting Profit is a company's sum total earnings, com...

Accounting Profit is a company's sum total earnings, computed according to Generally Accepted Accounting Principles (GAAP), and involves the explicit costs of operating business, l

Human behavior and budgetary control, Human behavior and budgetary control ...

Human behavior and budgetary control An important feature of control in business is that control is exercised by managers over people. Their attitudes and response to budgetary

Implementation of the decisions, Implementation of the Decisions Once a...

Implementation of the Decisions Once alternative courses of action have been chosen, they must be implemented as part of the budgeting procedure. The budget is a financial plan

.Sale Budget, I need to complete a sale Budget; however I don''t have the s...

I need to complete a sale Budget; however I don''t have the sale price, I have the actual and Budgeted sales dollar Data0Sales Budget, and The following actual information that rel

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd