Meaning Standard Cost Accounting, Cost Management Video Lecture | Cost Management - B Com

Ans. Standard Cost Accounting is a method used by businesses to determine the expected costs of producing goods or services. It involves setting predetermined standards for various cost elements, such as materials, labor, and overhead, and comparing the actual costs incurred with these predetermined standards.

Ans. Standard Cost Accounting aids in Cost Management by providing a benchmark for businesses to measure and control their costs. It allows companies to identify variances between actual costs and standard costs, enabling them to analyze the reasons for the discrepancies and take corrective actions to control and reduce costs.

Ans. The advantages of using Standard Cost Accounting include: - Cost control: It helps businesses identify cost variances and take appropriate measures to control and reduce costs. - Performance evaluation: Standard costs serve as a basis for evaluating the performance of individuals, departments, or the entire organization. - Decision-making: Standard Cost Accounting provides reliable cost information, enabling management to make informed decisions regarding pricing, production volume, and resource allocation. - Budgeting: It facilitates the development of accurate budgets by providing predetermined cost standards. - Motivation and incentives: Standard Cost Accounting can be used to set performance targets and provide incentives to employees who achieve or exceed the standard levels.

Ans. Standard Cost Accounting handles changes in actual costs by analyzing and recording the differences between actual costs and standard costs. These differences, known as variances, are classified into various categories such as material price variances, material usage variances, labor rate variances, and overhead variances. By analyzing these variances, businesses can identify the causes of cost changes and take appropriate actions to manage and control them.

Ans. The limitations of Standard Cost Accounting include: - Rigidity: Standard costs may not be flexible enough to accommodate changes in market conditions, technological advancements, or other external factors. - Time-consuming: Maintaining and updating standard costs can be a time-consuming process, especially in dynamic and rapidly changing industries. - Unrealistic standards: If the predetermined standards are not based on accurate and realistic data, they may not reflect the actual costs of production, leading to inaccurate cost analysis and decision-making. - Complex calculations: Calculating and analyzing various variances can be complex and require expertise, making it challenging for small businesses or those with limited resources. - Lack of motivation: Employees may become demotivated if they perceive standard costs as unachievable or unrealistic, leading to a loss of morale and productivity.