Page 156 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 8: Standard Costing
Gopika Juneja, Lovely Professional University

Unit 8: Standard Costing Notes

CONTENTS

Objectives
Introduction
8.1 Meaning and Definition of Standard Costing
8.2 Budgetary Control and Standard Costing
8.3 Estimated Costing
8.4 Standard Costing as a Management Tool

8.5 Limitations of Standard Costing
8.6 Determination of Standard Cost
8.7 Summary
8.8 Keywords

8.9 Review Questions
8.10 Further Readings

Objectives

After studying this unit, you will be able to:

z z Define Standard costing
z z Distinguish between budgetary control and standard costing
z z Describe Estimated costing
z z Discuss Standard costing as a management tool and limitations of standard costing

z z Illustrate the determination of standard cost and cost sheet
Introduction

Standard costing is a tool, which replaces the bottleneck of the historical costing. Historical
costing is one of the tools, which fulfills the one of the objectives of costing i.e. ascertainment
of costs. The cost of a product can be ascertained only after the production of a product; which
is meant as “Historical costing”. Historical costing facilitates to ascertain the cost of a product
which is connected with yester operations or with past. The ultimate aim of studying this unit is
to control the cost of a product as one among the objectives of cost effectiveness strategy of the
business enterprise.
The profit maximization can be had by way of implementing the following two different
strategies:

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