THE PROCESS OF STANDARD COSTING

THE PROCESS OF STANDARD COSTING
The process of standard cost is as below:

(i) Setting of Standards : The first step is to set standards which are to be achieved, the process of standard setting is explained below.

(ii) Ascertainment of actual costs : Actual cost for each component of cost is ascertained. Actual costs are ascertained from books of account, material invoices, wage sheet, charge slip etc.

(iii) Comparison of actual cost with standard cost : Actual costs are compared with the standards costs and variances are determined.

(iv) Investigate the reasons for variances: Variances arises are investigated for further action. Based on this, performance is evaluated and appropriate actions are taken.

(v) Disposition of variances : Variances arise are disposed off by transferring it the relevant accounts (costing profit and loss account) as per the accounting method (plan) adopted.