What Is Standard Costing?

[charlie]

I want to understand more about Standard Costing and its role in accounting and financial management. How is Standard Costing used to estimate production costs, control expenses, and measure performance? Also, how does Standard Costing affect the preparation of financial statements, and what are the main advantages and limitations of using Standard Costing compared to other costing methods? Any insights or examples from practical experience would be great.

 

[jainnorton]

Standard costing is an accounting technique that predetermines the expected cost (standard cost) of a product's materials, labor, and overhead. Companies compare this benchmark to the actual costs incurred. The difference is a variance, which management analyzes to control costs and measure operational efficiency.