Relevance of Standard Costing & Variance Analysis Essay - 1

Relevance of Standard Costing & Variance Analysis - Essay ExampleFrom this paper it is clear thatthe standard cost is a mold unit cost i.e. the price and standard amount of each resource to be utilized in manufacturing a product and providing a service. A variate is the dispute of actual cost incurred and expected standard cost. The variance analysis involves breakup of total variance to explain how much variance is caused by difference in use of resources from the standard usage quantity and how much variance is caused by the difference in prices of resources from the standard be. The standard costing can be advantageous only if the cost standards are carefully established and prudently used. The use of standards solely for placing blame can have negative impact on management and employees. The major advantages include better management planning, promotes economy by making the employees understand importance of cost reduction, setting selling price, management control, highlight s variances in management by exception and simplify the inventories costs reducing clerical costs.As the study stresses the standard costing is suited to the control of variable and direct costs but not fixed and indirect costs, the usefulness of standard costing has been questioned because the in recent times the overhead costs have become the germane(predicate) factory costs whereas the importance of direct labour costs has diminished.JIT is an inventory system which works towards keeping zero inventories.