Standard costing and budgetary control , Managerial Accounting

Assignment Help:

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.


Related Discussions:- Standard costing and budgetary control

What is sealed bid pricing, What is Sealed bid pricing Another from of ...

What is Sealed bid pricing Another from of competition oriented pricing is the sealed bid pricing. In a large number of projects, industrial marketing and marketing to the gove

Managerial accounting, Managerial Accounting Before going to Managerial...

Managerial Accounting Before going to Managerial Accounting let us discuss a bit about Financial Accounting. Financial accounting is concerned with reporting to the external pa

Linear programming, what areas can linear programming be applied in manager...

what areas can linear programming be applied in managerial accounting?

Nominal Payback Periods, What would be the Nominal Payback Period for an ac...

What would be the Nominal Payback Period for an account with 4% compounded annually for 5 years.

Mgt acc., company jobcosting system

company jobcosting system

Manufacturing overheard, different methods used to assign manufacturing ove...

different methods used to assign manufacturing overhead

Industrial Grinders, accepted#Regarding the Overhead costs, these are alloc...

accepted#Regarding the Overhead costs, these are allocated based on Direct Labor;

Capital budgeting – planning investments, The management of Popular Stores ...

The management of Popular Stores Sdn. Bhd. are in the process of exploring the company’s investment opportunities.

Control-role of management accountant , Control Control includes a ...

Control Control includes a comparison of actual performance with the plan so that deviation from the plan can be identified and corrective action taken. It can be define

Illustration of graphic analysis , Illustration of Graphic Analysis Th...

Illustration of Graphic Analysis The four steps of cost-volume-profit analysis can be employed to graph and study any cost-volume relationship. Suppose that you have been aske

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