Question

Define Standard Costing. Explain in detail advantages of Standard Costing.

Answer 1

Definition of Standard Costing

Standard costing is an accounting system used by some manufacturers to identify the differences or variances between:

The actual costs of the goods that were produced, and

The costs that should have occurred for the actual goods produced

The costs that should have occurred for the actual good output are known as standard costs,

Five of the benefits that result from a business using a standard cost system are:

Improved cost control.

More useful information for managerial planning and decision making.

More reasonable and easier inventory measurements.

Cost savings in record-keeping.

Possible reductions in production costs.