Question

(a) Explain the similarities and differences between standards and budgets. (b) Contrast the accounting for standard and budgets.

Answer 1

a. Similaritues between standard and budget coata

1. Standard costs are estimated costs and budget Costs also estimated costs.

2. Both standard and budget Costs are control Costs and to bring efficiency in the future for product.

3. Both standard costs and budget costs are comparison Costs with the actual costs after production.

4. Standard and budget costs are used by the management for scheduling and reporting.

Differences between standard and budget Costs:

1. Standard costs are pre-determined and planned costs.Budget costs are based on past experiences.

2. Standard costs can be calculated on per unit Basis but budget Costs are cannot be calculated on per unit Basis.

3. Standard costs are planned only for expenditure. budget Costs are planned on both income expenditure.

4. standard costs based on technical estimated but budget Costs are based on historical data which are adjusted based on future consequences.

b. Contrast the accounting for standard and budget costs:

Budgets are not used in accounting system but standard costs can be entered into financial statements.