Variance Analysis and Standard Costing
Standard costing is defined with CIMA like a technique that uses standards for revenues and costs for the purpose of control via variance analysis. CIMA defines a standard costs also. We will restrict ourselves in this text, to CIMA's definition of a standard cost
Standard cost is defined like 'predetermined calculation of how much costs must be beneath specified working situations.
Standard variance and costing analysis is a technique used with management accountants in the implementation of their service in the areas of control and planning, decision making to management in the given ways:-
- Like a planning aid, standard costs provide helpful building blocks in the preparation of budgets for departments cost and products
- Like a control aid, standard costs give data that show whereas the deviation from the plan have arisen and whereas corrective action through management is needed
- Like a decision making aid, standard costs may be employed in building up estimated cost data for new products in order that decisions might be made about factors as like the likely price at that the product must be marketed.