The document discusses standard costing, which involves setting standards for costs and revenues for controlling costs through variance analysis. It describes establishing standards for different cost elements like direct materials, direct labor, and overheads. Variances between actual and standard costs are analyzed to identify causes. Variance analysis helps reduce costs, measure efficiency, and control prices. The document outlines the standard costing process and advantages like effective cost control and developing cost consciousness.
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Breakeven Analysis- A decision-making aid that enables a manager to determine whether a particular volume of sales will result in losses or profits.
Made up of four basic concepts
Fixed costs- costs that do not change
Variable costs- costs that rise in propitiation to sales
Revenue- the total income received
Profit- the money you have after subtracting fixed and variable cost from revenue
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...RajaKrishnan M
Meaning Definition Characteristics Scope Objectives and Function Financial accounting and Management accounting - Management accounting and Cost accounting - Cost accounting and Management accounting and Financial accounting - Tools and Technics- Advantages and limitations
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
Cost Accounting-
-Meaning of Cost Accounting
-Scope of Cost Accounting
-Nature of Cost Accounting
-Relationship b/w Financial Accounting & Cost Accounting
-Cost Accounting v/s Management Accounting
-Objectives of cost accounting
-Function of cost accountant
-Essentials of cost accounting
-Advantages of cost accounting
-Limitations of cost accounting
-Role of cost in cost accounting
-Cost Unit & Cost Centre
-Cost Techniques
-Costing Systems
-Costing Methods
-Cost Classification
-Components of total cost
-Cost Sheet.
Breakeven Analysis- A decision-making aid that enables a manager to determine whether a particular volume of sales will result in losses or profits.
Made up of four basic concepts
Fixed costs- costs that do not change
Variable costs- costs that rise in propitiation to sales
Revenue- the total income received
Profit- the money you have after subtracting fixed and variable cost from revenue
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...RajaKrishnan M
Meaning Definition Characteristics Scope Objectives and Function Financial accounting and Management accounting - Management accounting and Cost accounting - Cost accounting and Management accounting and Financial accounting - Tools and Technics- Advantages and limitations
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
This presentation covers introduction,meaning,definition,characteristics,objectives,advantages,limitations,essential conditions for an effective system & methods of standard costing.
Cost control and cost reduction are the two most viewed area in finance. Every corporate entity will have a specialized department to study on cost aspects. Apart from finance it is places a great role in micro economics.This presentation will helpful to university students in their study and enhance greater knowledge.
LearningObjectivesAfter studying Chapter 8, you will be a.docxcroysierkathey
LearningObjectives
After studying Chapter 8, you will be able to:
Explain the signi�icance of pro�it analysis for an organization.
Describe the major characteristics and conditions of a standard cost system.
Understand the information contained in a standard cost sheet.
Compute materials price and usage variances, and identify potential causes of such variances.
Compute labor rate and ef�iciency variances, and identify potential causes of such variances.
Explain the major considerations that are the basis of standard costs for overhead and compute
budget variances and capacity variances for overhead.
Explain why the capacity variance is related only to �ixed overhead costs.
Understand issues relating to variance investigation and disposal of variances.
8 Cost Control Through Standard Costs
nd3000/iStock/Thinkstock
Explain how standard costs can be used in various different settings.
Describe ethical considerations relating to standards and variances.
WhereDoIStartWithStandardCosts?
Jean-Claude Recca, President of Rue de Lorraine, a chain of fast-food restaurants in central France, just
returned from a reunion of his INSEAD graduating class. During the day of activities in the Riviera, he talked
with several of his classmates who have become extremely successful in various businesses. One of those
classmates suggested to Jean-Claude that adoption of a standard cost system eliminated most of her �irm’s
unacceptable scrap and spoilage, caused an examination of nonvalue-added activities, and substantially
reduced several inef�icient operations.
Jean-Claude did not know whether his restaurant chain would really bene�it from a standard cost system. He
wondered: If he makes the change, which costs should be put on standards? How does he set up standards?
When do variances mean something? Isn’t a standard cost system expensive to use? Isn’t it a pain in the
derriere? Wouldn’t a tight budget do the same thing?
These questions were more than Jean-Claude could consider. He decided to bounce the idea of standard
costs off his controller.
In measuring success in any undertaking, a comparison is usually made between actual performance and expected
performance. Any difference is a variance. A manager is then left with the responsibility to explain the what, why,
and how of the variance. In doing so, the manager must understand the in�luence of key variables on the actual
results, focus on areas that deserve more detailed investigation, and determine changes that must be made in future
planning and control. This chapter introduces the concept of pro�it analysis and then concentrates on variances
associated with a standard cost system for direct materials, direct labor, and factory overhead.
8.1Pro�itAnalysis
Pro�it is an overall measure of how well an organization is doing. A pro�it variance then is the difference between
the actual net income and the planned net income for the same period. The causes of such a variance are related to
...
COSTING means recording of all the costs incurred in a business in a way that can be used to improve its management. this is useful or commerce students and professional. BCOM, CA,CMA,CS
Problems and Prospects of Border Trade between North east India and BangladeshSwarnima Tiwari
Abstract: Though trade between India and Bangladesh forms only a small part of the total trade, enhancing bilateral trade is of high importance to both countries. For India, increase in trade with Bangladesh would help to address many concerns of economic isolation of its backward north eastern states and generate new market opportunities for small-scale producers from the impoverished hinterlands of eastern states. For Bangladesh, wider areas of cooperation, investment and allied development opportunities will be thrown open with greater trade openness with India. Moreover, both India and Bangladesh has long-standing commitments toward regional economic cooperation in South Asia, of which their bilateral trade is a significant part. Bilateral economic relation between India and Bangladesh has grown since the latter got independence in 1971, albeit at a slow pace. Ups and downs in the political relations between the two countries have had a strong bearing on development of their economic ties. In recent years, both countries have registered good growth rates and have made significant progress in social development. Bilateral trade has also grown, as a result of open economic policy outlook of both countries. Among South East Asian countries, Bangladesh is the largest trading partner of India, with total bilateral trade crossing US$ 5.5 billion in the year 20122. The two-way trade flow between them was US$ 1.08 billion in year 2002. This puts the annual average growth in trade at about 4.7 percent. The present paper tries to highlight the problems and prospects of border trade for North-East India and Bangladesh as a part of India’s look east policy.
Key words: India’s look East Policy, Bilateral trade, South-East Asia, look-East Policy
2. Topics to be discussed
1. Meaning of standard, standard cost and standard costing.
2. Steps involved in standard costing.
3. Types of standards.
5. Establishment of standards for different elements of cost.
6. Variances and analysis of variances.
7. Investigation of variances and treatment of variances.
8. Advantages and disadvantages of standard costing.
9. Conclusion.
10. Bibliography.
3. Standard – It is used to refer to the predetermined rate
e.g. Rs 10 per unit
Standard costs - are predetermined cost which may be
used as a yardstick to measure the efficiency with
which actual costs has been incurred under given
circumstance.
Standard Costing – This is a technique which uses
standards for cost and revenues for the purpose of
control through variance analysis.
4. Standard costing involves the
following steps:
Setting standard costs for different
elements of costs
Recording of actual costs
Comparing between standard costs
and actual costs to determine the
variances
Analyzing the variances to know the
causes
Reporting the analysis of variances to
management for taking appropriate
actions wherever necessary
5. In simple Words:-
• Standard Costs
• Actual Costs
• Estimated Costs
Standard
costing
involves in
determining
6. For example:-
The system of standard costing can be used effectively to those industries
which are producing standardized products and are repetitive in nature.
Examples are cement industry, steel industry, sugar industry etc.
7. From the above, we may note that standard costs are:
•Pre-determined cost: Standard cost is always determined in advance and
ahead of actual point of time of incurring of costs.
•Based on technical estimated: Standard cost is determined only on the basis
of a technical estimate and on a rational basis.
•For the purpose of Comparison: The very purpose of standard cost is to aid
the comparison with actual costs.
•Based for price fixing: The prices are fixed in advance and hence the only
variation basis is the standard cost.
8. The
difference
between
actual
costs and
standard
cost is
known as
Profit Variance
Historical
Cost
9. TYPES OF STANDARDS
• Current Standard
• Basic Standard
Current Standard: This standard is used over a short
period of time and is related to current conditions.
Basic Standard: This standard is used over a long period
of time, from which a current standard can be developed.
10. ESTABLISHMENT OF STANDARDS
Analysis, experiment and training are fundamental
prerequisites for establishing standards ,these were
basic tenets of standard setting from early days.
11. Standard should be set for each element
of cost as follows –
Direct material – Standard direct material cost for
each product should be established. This will involve
1. Determination of standard quantity of materials
2. Determination of standard price per unit of
materials
12. Direct labor cost–
Determination of standard DLC will involve
determination of :
1. Standard time
2. Standard rate
Direct Expenses –
Standards for these may be based on past performance
records subject to anticipatory changes therein.
13. Standards for Overheads-
The overheads are classified into fixed, variable and semi-variable
overheads. Standard overhead rate is determined for
these on the basis of past records and future trend of prices. It
will be calculated per unit or per hour.
Setting standard for overhead cost involves the following two
steps:
1. Determination of the standard overhead costs, and
2. Determination of the estimates of production
Standard hour–
It is hypothetical hour which measures the amount of work
that should be performed in 1 (one) hour.
14. Standard cost card –
It shows the quantity and price of each type of materials,
labor, time and rate, hours and rates of variables and
overheads. In short a standard cost card should be
maintained for each product showing total unit cost of
production, breaking into respective elements of cost.
15. Objectives of Standard Costing:
1. Cost Control
2. Management by Exception
3. Develops Cost Conscious Attitude
4. Fixation of Prices
5. Fixing Prices and Formulating Policies
6. Management Planning
16. Which in a simple word
means:-
The purpose of standard costing is to
1. Reduce Costs
2. Measure Efficiency
3. Control Prices
17. VARIANCES
The deviation of actual from standard is called variance.
The two types variance are:
1. Favorable – actual cost < standard cost
2. Unfavorable – standard cost < actual cost
18. Variance may be divided into two
groups:
1. Price variance e.g. material price
variance, sales price variance.
2. Volume variance e.g. material usage
variance, sales volume variance.
19. ANALYSIS OF VARIANCE
Variances are analyzed in respect of:
1. Direct material
2. Direct labor
3. Overheads:- a. Variable overheads
b. Fixed overheads
20. In a standard cost system, all manufacturing costs are applied, or charged
to the inventory using standard or predetermined prices, and quantities.
The differences between the applied costs and the actual costs are charged
to variance accounts as shown symbolically in the enlarged graphic given.
21. Variance Investigation
Three approaches to variance investigations
are:
1. Rules of Thumb method.
2. Cost benefit analysis.
3. Use of statistical quality control chart.
22. Rules of Thumb method-
Based on experience, intuition and judgment, managers may
develop some rules which guide them in investigation
decision. This method has its own limitations because of its
rule of thumb nature.
Cost- benefit analysis –
Since not all variances are investigated by management,
therefore decisions to investigate can also be taken by cost
benefit analysis.
Use of statistical quality control –
SQC can also be applied by the firm in deciding whether to
investigate a variance. The key to SQC is a control chart.
23. TREATMENT OF VARIANCES-Three
methods are involved:
1. Transfer to profit and loss account or to cost of sales - all cost
variances are to be transferred to profit and loss account or to cost
of sales. If this method is followed, the standard cost of sales will
be converted into actual cost of sales.
2. Proration to inventories and cost of sales- cost variances are
distributed to work- in- progress and finished goods inventories
and cost of sales either on the basis of units of value. As a result,
both the inventories and cost of goods sold will be shown at actual
cost.
3. Setting up as reserves – variances are set up as reserves until
they are set- off.
24. Advantages of Standard Costing
1. To measure efficiency
2. To fix prices and formulate policies
3. For Effective cost control
4. Management by exception
5. Valuation of stocks
6. Cost consciousness
7. Provides incentives
25. Limitations of Standard Costing
1. Difficulty in setting
standards
2. Not suitable to small
business
3. Not suitable to all
industries
4. Difficult to fix responsibility
5. Technological changes
26. Conclusion
Standard quantities of inputs can be established based on ideal
performance, or on expected performance, but are usually based on
efficient and attainable performance. Research in psychology has
determined that most people will exert the greatest effort when goals
are somewhat difficult to attain, but not extremely difficult. If goals
are easily attained, managers and employees might not work as hard
as they would if goals are challenging. But also, if goals appear out of
reach, managers and employees might resign themselves to falling
short of the goal, and might not work as hard as they otherwise would.
For this reason, standards are often established based on efficient
and attainable performance.
Hence, a standard is a type of budgeted number; one characterized by
a certain amount of rigor in its determination, and by its ability to
motivate managers and employees to work towards the company’s
objectives for production efficiency and cost control.
27. BIBLIOGRAPHY
1. Martin. James R, Management Accounting: Concepts, Techniques &
Controversial Issues, 2000
2. Banerjee. Bhabatosh, Cost Accounting- Theory And Practice, PHI Learning Pvt
Ltd, 2009
www.accountingcoach.com
www.accountingformanagement.com
www.wikipedia.com