Standard Costing

Topics: Cost accounting, Costs, Management accounting Pages: 9 (2222 words) Published: December 1, 2012
Introduction to Management Accounting

Lecture: Albert De Jonge

Student: John Alejandro Eusse Agudelo

Submission date: 20/04/12

Contentpage

Introduction3

Standard Cost3

History of Standard Costing4

Disadvantage of Standard Cost4

Advantage and benefits of Standard Costing 5 & 6

The relevance of standard in Brittan and rest of the world6

Overhead 7

Conclusion8

Reference and Bibliography9

Introduction

This report is based on the relevance of standard costing in Modern Britain, the report will include so fact and evidence that standard costing is relevant or not relevant for a 21st century Britain.

To clarify more on this topic and to support my argument and discussion it will be necessary to use empirical evidence such as case studies from social scientist and scholars specialised in the subject.

The assignment will focus on how standard costing is relevant in the UK compare to Germany and Japan. The aim of this report will be to present an argument for and against standard -costing. My findings will determine what evidence to use so that, the report will be unbiased and well presented according to the assessment task.

Lastly there will be difference between standard price and standard cost, this will be made clear and explain further. My research will be done through Internet source textbooks.

Standard Cost

“Standard cost is usually associated with a Manufacturing Company’s cost of material and direct labour and manufacturing overhead”.

Standard cost is different from Actual cost because standard cost is an estimate put together, Standard costing is a reliable technique used to manage and improve the performance of an organisation, standard costing can be seen to the same or similar to Activity based costing (ABC) but has often been criticized to be outdates and lost relevance but it was also suggested that the best techniques for controlling cost and performance management is to use ABC and standard costing

Standard costing is a management tool used to estimate the over cost of production assume normal operations in other words, the estimate cost of material, labour overheads and other cost for each unit of production or purchase in a given accounts period.

The basic concept of standard costing should be discuss clearly because it form the bases of the argument s to weather standing is relevant or not in the recent times.

The charted institute of management Accounting, London, defines standard costing as “the preparation of standard cost and analysing cost the causes of variation with a view to maintain maximum efficiency in production.

From the above definition, there are some key words that needs to be noted and explain for clarity of this report, one of which is standard cost – which is defined by the institute of cost and work Accountants as standard cost are prepared and used to clarify the final result of a business particularly by measurement of variations of actual cost from standard cost and the analysis of causes of variation for the purpose of maintaining efficiency of executive action.

History of Standard Costing

For over 100 years, standard costing has been used for valuing stock and work in progress “some historians say the origins of costing go back even further and have found evidence it was used in American Civil war by quarter master as a means of controlling cost. It doesn’t really matter when the technique was invented what is more important is that it is still in use today”

“In 1989 a survey showed that standard costing was being used by more than 75% of British Industries e.g. brewing, textile, electronics and Pharmaceuticals.

Disadvantage of Standard Cost

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