Standard Costing – Dani Ki Costing – CA Final Video Lectures
Standard Costing – Dani Ki Costing – CA Final Video Lectures | Standard Costing – Dani Ki Costing – CA Final Video Lectures | Standard Costing – Dani Ki Costing – CA Final Video Lectures
Dani Ki Costing
Final Video Lectures
Standard Costing is a concept that consists of two different terms with very deep meaning. They are ‘Standard’ and ‘Cost’. Where ‘standard’ means benchmark measurement of any element. In simple words a measurement which can be used to compare the actual results or which can be set as a goal to be reached. While cost means the expenditure incurred or the consideration paid for manufacturing a product or getting any service. While costing as means calculating the total cost incurred for a particular activity.
Standard costing toll is used by the managerial authorities to compare the actual results with that of the standard or budgeted results. Standard costing helps in finding the variance created between the budgeted and actual results. Different variances are found for the results of material, labour, profit etc. All these variances are interconnected if we put them in mathematical formula.
Variances are classified in three types they are Efficiency variance, Price variance and volume variance. Let us understand this classification in short:
- Efficiency Variance: Efficiency variance is generated on the basis of efficient or inefficient use of resources such as material labor etc.
- Price Variance: Price variance is generated when there is a difference in price which is expected and the actual price the organization has to pay for the resources.
- Volume Variance: As the above two variances volume variance is also generated when there is a difference between the volume budget by the organization for inputs or outputs and the actual volume of inputs or outputs.
The main purpose for using the standard costing technique is to detect the reasons behind variances generated and to take corrective actions wherever the management finds the problems or defects.