Pre-requisites for the success of standard costing

For establishing a system of standard costing, a number of requirements are to be fulfilled, which are; 1. Establishment of Cost Centres 2. Classification of Accounts 3. Types of Standards 4. Setting Standard Costs Let’s have a discussion on each of them to have a good understanding of the process. 1. Establishment of Cost Centres: A cost centre is a person, location or an equipment or ( a group of these ) In respect of which costs are to be ascertained. For example there may be 10 machines in a…

Standard Costing – An Introduction

One of the primary function of management accounting is to help in managerial control and cost control is perhaps the most crucial part of managerial control. The success of management of a business enterprise depends to a large extent on efficient cost control. Standard costing is one of the most important tool in the hands of management which helps it to plan and control costs of business operations. Under standard costing, the costs of different business operations are predetermined. These predetermined costs are called Standard costs. The actual costs are then measured…