Friday 20 October 2017
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26 days ago

Standard costing and variance analysis


CONCEPT OF STANDARD COSTING Cost control, leading to cost reduction, should always be the objective of any firm or institution where scarce resources are used. Even if the firm can sell its goods or services at a very remunerative price, it should still try to reduce the use of factors of production, without jeopardising the quality of the product or the service. The best way of doing this is to constantly think as to where the cost can be further r but the first step is to try to see that these do not go beyond a level determined beforehand. If this approach is adopted, i.e., if an attempt is made to see that actual costs do not go beyond this level, the approach will be that of Standard Costing. In fact, it is the philosophy of standards which will bring the best results and not merely the mechanism of adopting the Standard Costing techniques.

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