Category: Standard Costing

Cost calculation is one of the most important functions of management accounting. The basic function of management accounting is to check wastage of resources, it is the basic requirement on the part of management to check all sorts of wastage. The management fixes the responsibilities of various activities and prescribes some predetermined norms so that a comparison be made with predetermined activities to actual performances.

Standard costing is such a technique wherein costs are fixed well in advance and compared to the actual costs, the reasons for variance are taken to tasks to avoid further adverse cost variations. Standard cost is a technique used for controlling cost and fixing responsibility of inefficient persons.

In this technique, costs are determined for various activities and these are compared to actual performances if adverse variations are found, these are taken seriously to corrective actions. In the present chapter, various cost elements are checked and corrected if shown adverse results.