Budgetary Control and Standard Costing
Budgetary Control and Standard Costing Standard costs are amount that are obtained in an ideal circumstance for raw materials, direct labour, and factory overhead. Standard costs are developed prior to the applicable operating periods and remain in effect until circumstances require their revision. The concept of standard cost can be used informally in special periodic management reports comparing actual costs with what costs should have been according to plans. However, standard costs are most effectively used when they and related variances are entered in accounts. Cost variances are unfavourable when actual costs exceed standard costs and favorable when standard costs exceed actual costs.