Standard Costing
Standard costing is a budgeting method used by businesses to estimate the expected costs of production. It involves setting predetermined costs for materials, labor, and overhead based on historical data and industry standards. By comparing these standard costs to actual expenses, companies can identify variances, which indicate areas where they are overspending or saving. This helps in controlling costs, improving efficiency, and making informed financial decisions. Overall, standard costing serves as a financial benchmark, guiding businesses in their budgeting and operational strategies.
Additional Insights
-
Standard costing is a budgeting technique used by businesses to estimate the expected costs of producing goods or services. It sets predetermined costs for materials, labor, and overhead, which serve as benchmarks for measuring performance. By comparing actual costs to these standards, companies can identify variances, helping management understand where they are overspending or saving money. This process aids in cost control, efficiency improvements, and financial planning, ensuring that businesses operate within their budgets and maintain profitability. Ultimately, it's a tool for better decision-making and resource management.