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.
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