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Standard Costing and Variance:

 Standard Costing and Variance Analysis:


                Budget is the compositions of the budgeted and standard costs. Budget is an expected figure of amount like revenue which is target in terms of amounts for the upcoming fiscal year and standard costing means the per unit cost.

Standard Costing:

Standard Costing can be define as the budgeted unit cost which can motivate to achieve the optimal productivity and efficiency. Standard Costing is very important for a budgeting process it helps the business financial management team to know about the per unit cost and per hour labor cost of each production unit which a business organization will spend over complete manufacturing process. The business organization can set the selling per unit price over the basis of the standard costs.

Actual Costing :

Actual Cost is the real time cost which a manufacturing unit bears to pay after production of products.

Variance:          
  
The difference of the actual cost and standard cost is known as variance. The percentage `difference of the actual cost and standard cost is known as the variance analysis. That show us the real picture of the production unit performance. Variance analysis enables us towards the management by expectations.

Management by Expectation:

Management by Expectation means the practice of giving attention primarily to significant deviations from expectations (Whether favorable or unfavorable) in simple words management give more attentions to those areas where some weakness is exist. Whenever there is some variance exist the management give attention otherwise they saying everything is under control.

Management by expectations is a process in which everyone is confirmed and agreed on a point and they plan to act in at a same committed decision.

Favorable Cost:

When the actual cost is less than the standard cost the result will be favorable for the business.

Unfavorable Cost:

When the actual cost is greater than the standard cos the result will be called unfavorable for business. We know that every business organization trying of the ideal standard which can be possible only under the optimal and very well measured, control and managed situations.

Practical Standards:

The Practical standards are the standards where some reasonable expectations can be possible or achieved with an allowance for the normal spoilage, waste and down time.


 These are the some important and understandable lines about the standard costing and variance.That helps us to understand about the basics of the costings terminologies.

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