Chapter summary on standard costing

Cost/Management Accounting notes

Standard cost is a yardstick that measures how well the organization has achieved its set

The process of standard costing involves setting standards for:
• Material costs.
• Direct labor.
• Sales price and margin.

Types of standards include:
• Basic standards
• Ideal standards
• Attainable standards
• Current standards

Standard costing systems provide information for various uses. These include:
• Setting of budgets
• Acts as a control device and simplifies performance evaluation
• Facilitates profit measurement and inventory valuation
• Aids in decision making, motivation, pricing and cost reduction

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