PPT: Standard Costing | Cost and Management Accounting for CA Intermediate PDF Download

 Page 1


1
Standard costing
Page 2


1
Standard costing
Standard
?
The word standard means a criterion (principle, 
measure).
?
A standard figure is one against which one can 
measure an actual figure to see the deviation.
2
Page 3


1
Standard costing
Standard
?
The word standard means a criterion (principle, 
measure).
?
A standard figure is one against which one can 
measure an actual figure to see the deviation.
2
Standard Rate
?
The word Standard Rate is the numerical proportion 
prevailing between two sets of things.
?
A firm has three ‘standard of things’ available on which to 
base standard rates: Money, Physical inputs and Physical 
outputs.
3
Money
Physical 
Inputs
Physical 
Outputs
Money/output, e.g. 
Re./unit of 
materials
Money/output, e.g. 
Re./unit of product
Input/output, e.g. labour/machine 
hrs./unit of product
Page 4


1
Standard costing
Standard
?
The word standard means a criterion (principle, 
measure).
?
A standard figure is one against which one can 
measure an actual figure to see the deviation.
2
Standard Rate
?
The word Standard Rate is the numerical proportion 
prevailing between two sets of things.
?
A firm has three ‘standard of things’ available on which to 
base standard rates: Money, Physical inputs and Physical 
outputs.
3
Money
Physical 
Inputs
Physical 
Outputs
Money/output, e.g. 
Re./unit of 
materials
Money/output, e.g. 
Re./unit of product
Input/output, e.g. labour/machine 
hrs./unit of product
Standard Cost
?
Standard cost is ‘a predetermined cost which is 
compared in advance of production on the basis of 
specifications of all the factors affecting costs and 
used in standard costing.’
?
In other words, standard cost is a predetermined 
cost that should be attained under a given set of 
operating conditions.
4
Page 5


1
Standard costing
Standard
?
The word standard means a criterion (principle, 
measure).
?
A standard figure is one against which one can 
measure an actual figure to see the deviation.
2
Standard Rate
?
The word Standard Rate is the numerical proportion 
prevailing between two sets of things.
?
A firm has three ‘standard of things’ available on which to 
base standard rates: Money, Physical inputs and Physical 
outputs.
3
Money
Physical 
Inputs
Physical 
Outputs
Money/output, e.g. 
Re./unit of 
materials
Money/output, e.g. 
Re./unit of product
Input/output, e.g. labour/machine 
hrs./unit of product
Standard Cost
?
Standard cost is ‘a predetermined cost which is 
compared in advance of production on the basis of 
specifications of all the factors affecting costs and 
used in standard costing.’
?
In other words, standard cost is a predetermined 
cost that should be attained under a given set of 
operating conditions.
4
Standard Costing
?
Standard costing is a technique which is used in many 
industries, where production is of repetitive nature.
?
Standard costing is developed due to the shortcomings of 
historical costing.
?
CIMA, London, defines standard costing ‘as the 
predetermined cost based on technical estimates of materials, 
labour and overheads for selected period of time and for the 
prescribed set of working conditions’.
?
Standard costing is that technique in which the standard cost 
is determined before starting the production.
5