Scribd
Upload
59 views2 pages

Standard Cost Versus Budgetary Control

Standard costing and budgetary control both aim to maximize efficiency and managerial control through comparing actual performance to predetermined standards and analyzing and reporting variances. However, standard costing focuses on manufacturing costs at a detailed product level, while budgetary control takes a broader look at entire departments or businesses. Budgets can incorporate standard costs to more reliably establish targets and allow for flexible budgets based on expected production volumes. Overall, standards are essential for developing accurate budgets to form the basis of cost comparisons for management control.

Uploaded by

Lina Ali Abdul
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
59 views2 pages

Standard Cost Versus Budgetary Control

Standard costing and budgetary control both aim to maximize efficiency and managerial control through comparing actual performance to predetermined standards and analyzing and reporting variances. However, standard costing focuses on manufacturing costs at a detailed product level, while budgetary control takes a broader look at entire departments or businesses. Budgets can incorporate standard costs to more reliably establish targets and allow for flexible budgets based on expected production volumes. Overall, standards are essential for developing accurate budgets to form the basis of cost comparisons for management control.

Uploaded by

Lina Ali Abdul
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

Standard Cost versus Budgetary Control

Both standard costing and budgetary control aim at the objective of maximum efficiency and managerial control. Standard cost and budgetary control have the comparing actual performance with the predetermined standards, analyzing and reporting of variance. The standard costing and budgetary control can be comparing by following dissimilarityStandard costing Standard costing is intensive as it is applied to manufacturing of a product or providing a service. It is determined by classifying recording and allocating expenses to cost unit. It is a part of cost account, a projection of all cost accounts Variances are reveled through different accounts. Budgetary Control Budgetary control is extensive in It deals with the operation of department or business as a whole Budget are prepare for sales, production, cash etc. It is a part of financial account, a projection of all financial account. Control is exercised by taking into account budgets and actual. Variances are not revealed through accounts. Budget can be applied in parts. It is more expensive and broad in nature, as it relates to production, sales, finance etc. Budget can be operated with Standard.

It cannot be applied in parts. It is not expensive because it relates to only elements of cost. This system cannot be operated without budget.

The role of standard cost in budget development


Standards are almost indispensable in establishing a budget. Because both standards and budgets aim at the same objective- managerial control it is often felt that the two are the same and cannot function independently. This opinion is supported by the fact that both use predetermined costs for the coming period. Both budgets and standard costs make it possible to prepare reports which compare actual costs and predetermined costs for management. Building budgets without the use of standard cost figures can never lead to a real budgetary control system. The figures used in the illustrations in the budget chapters are only fair estimates, even though they have been set with great care and cooperation of those responsible. Under such conditions, the budget can hardly be considered the basis against which actual results are to be measured. This shortcoming is recognized by adding the flexible budget as a refinement. With the use of standard cost the preparation of budgets for any volume and mixture of products is more reliably and speedily accomplished and a budget becomes a summary of standards for items of cost, because a budget refers to total dollars while a standard is set on a unit basis.

You might also like