Question

What is the purpose of using standard costs?

Answer 1

Solution:

Standard costing is the ascertainment of standard cost and it’s comparison with the actual cost inorder to ascertain variations if any.otherwise it’s called a predetermined cost after taking all the factors into consideration.

Purpose of Standard costs:

1)If any variation arises ,Standard costing helps in making appropriate decisions.

2)We can use management by exceptions easily with standard costing.

3)Standard costing measures after a deep study,this study helps in innovation of new ways to increase our performance

4)Standard costing helps in making effective production policies

5)Better control and supervision is possible through Standard costs.

6)It is easy to build planning budget in Standard costing

7) Every employee is alert with the Standard cost.Because they know that they will not bring performance,company may demote him.It will automatically increase their efficiency.

8)Stock evaluation is easy through Standard costing

9)Here the target or Standard is already set, there by delegate authority and responsibility towards the concerned people’s.