Page 215 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II Gopika Juneja, Lovely Professional University

Notes Unit 12: Standard Costing

CONTENTS
Objectives
Introduction

12.1 Standard Cost and Standard Costing
12.1.1 Standard Cost
12.1.2 Standard Costing
12.2 Advantages and Disadvantages of Standard Costing

12.2.1 Advantages of Standard Costing
12.2.2 Disadvantages or Limitations of Standard Costing
12.3 Determination of Standard Costs
12.3.1 Setting up of Standard Costs
12.3.2 Standard Hour

12.3.3 Revision of Standards
12.3.4 Standard Cost Card or Standard Cost Sheet
12.4 Analysis of Variances
12.4.1 Principles of Analysis of Variance

12.4.2 Classification and Computation of Variances
12.5 Summary
12.6 Keywords
12.7 Review Questions
12.8 Further Readings

Objectives

After studying this unit, you will be able to:
 Explain the concept of standard, standard cost and standard costing;
 Discuss the advantages and disadvantages of standard costing;
 Describe the determination of standard costs;

 State the principles of analysis of variances (Material, labour and overheads).

Introduction

The success of an industrial organisation depends, to a greater extent, upon how effectively it
has controlled its costs. In order to exercise proper control over the costs, historical system to
costing provides a very little scope. Because, historical system to costing collects and records the
costs in the various books of accounts after they have been incurred. Historical system serves
only one purpose, viz., ascertainment of costs that again a post-mortem of the case. Costs in two

210 LOVELY PROFESSIONAL UNIVERSITY