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Standard Costing

Standard Costing. Topic Two. Standard Costing System. Standard costs for the actual output are recorded for each operation for each responsibility centre Actual costs for each operation are traced to each responsibility centre Standard and actual costs are compared

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Standard Costing

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  1. Standard Costing Topic Two

  2. Standard Costing System • Standard costs for the actual output are recorded for each operation for each responsibility centre • Actual costs for each operation are traced to each responsibility centre • Standard and actual costs are compared • Variances are investigated & corrective action • Standard are monitored & adjusted

  3. Unit Standard Cost To determine the unit standard cost for a particular input, two decisions must be made: 1. How much of the input should be used per unit of output (quantity decision)? 2. How much should be paid for the quantity of the input to be used (pricing decision)?

  4. Sources for Setting Standards • Historical experience • Engineering studies • Input from operating personnel

  5. Establishing Standards • Basic standards represent constant standards that are left unchanged over long periods • Ideal standardsdemand maximum efficiency and can be achieved only if everything operates perfectly. • Currently attainable standardscan be achieved under efficient operating conditions. • Kaizen standardsreflect a planned improvement and are a type of currently attainable standard

  6. Purposes of Standard Costing system • Prediction of future costs • Challenging target • Reliable & convenient source of data • Control device (investigation & improvement needed) • Simplifying the task of tracing costs

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