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NAMES ROLL NO

SHILPA SADAPHULE 121176

DEEPAK CHAUDHARY 121131

KAMLESH DUBE 121138

JYOTI PANDY 121162

NILESH RAMESH 121190

STANDARD COST

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What is standard costing?

Standard costing involves using the predetermined costs/standard costs to

compare with the actual to find the difference or variance. Variance can be

adverse (actual result is worse than standard) or favourable ( actual result is

better than standard)

Standard costing values its manufactured products with a predetermined

materials cost, a predetermined direct labor cost, and a predetermined

manufacturing overhead cost.

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Definition

Standard costing is the preparation of standard costs and applying

them to measure the variances from actual costs and analyzing the

causes of variations, with a view to maintain maximum efficiency in

production.

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STANDARD COST

a budget for the

production of one

unit of product or

service

COST VARIANCE

the difference

between the

actual cost and

the standard cost

ACTUAL COST

used in the

production of theproduct or service

STANDARD COST AND ACTUAL

COST

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STEPS INVOLVED IN IMPLEMENTING

STANDARD COSTING

(A) Determination of standard cost

(B) Recording of actual cost

(C) Comparison of standard cost and actual cost

(D) Finding out reasons for variance

(E) Reporting variance to the concerned for corrective action

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Purpose of standard costing

1. For fixing the responslibity

2. Study of Time & Speed

3. Increase in Efficiency

4. Helpful in production policy

5. Easy to Delegate power

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Types of standard costIDEL STANDARDS -These represent the level of performance attainable

when prices for material & labour are most favourable.

NORMAL STANDARDSThis achieved under normal operating

conditions.Standard hours which will produce at normal efficiency goods to

meet the average sales demand over a term of years.

BASIC STANDARDSIt is likely to remain constant over a period.A base

year is chosen for comparision purpose like statisticians use price indices.

CURRENT STANDARDSThese standards reflect the managements

anticipation of what actual cost will be for the current period.

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Companies Using Standard Costing:-

1. Indian Machine Tool - INDIA

2. Highlink Industrial Ltd. - CHINA

3. Sino Spares Ltd. - TURKEY

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Advantages of standard cost

It provides the best basis for estimating future cost and contribute to the

planning/budgeting function;

it assist in the comparison of the actual with the planned to evaluate

managerial performance;

by focusing on the variance whether adverse and favorable, it enable the

management to identify and take action to correct or improve present and

future planning and control;

the setting of standards will require the looking at the methods and

operations which will lead to improvement in efficiency by eliminating

inefficiencies;

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LIMITATIONS STANDARD

COSTINGVARIATION IN PRICE

VARYING LEVELS OF OUTPUT

CHANGING STANDARD OF TECHNOLOGY

ATTITUDE OF TECHNICAL PEOPLE

MIX OF PRODUCTS

DO NOT REFLECT THE TRUE VALUE AND EXCHANGE

BASED ON THEORETICAL MAXIMUM EFFICIENCY, ATTAINABLE

GOOD PERFORMANCE & AVERAGE PAST PERFORMANCE