Standard Cost & Standard Costing

Standard Cost & Standard Costing

Standard cost is a “predetermined cost which is calculated from management standard of efficient operation and the relevant necessary expenditure.”                                                         – I.C.M.A ENGLAND

Standard costing is “the preparation of standard costs their comparison of actual costs and the analysis of variances to their causes and points of incidence”                                                  – I.C.M.A ENGLAND

Thus, it is clear from these definitions that standard costs represent the scientifically planned or predetermined costs based on technical estimate, labour and overhead for selected period of time and for a prescribed set of working conditions. The word ‘standard’ connotes a thing serving as a basis for comparison. Standards can be established in respect of quantitative and qualitative like material and labor.