ECONOMICS

Detailed explanation-1: -Standard costing is a technique where the firm compares the costs that were incurred for the production of the goods and the costs that should have been incurred for the same. Essentially it is the comparison between actual costs and standard costs. The differences between the two are variances.

Detailed explanation-2: -Standard costing is the practice of estimating the expense of a production process. It’s a branch of cost accounting that’s used by a manufacturer, for example, to plan their costs for the coming year on various expenses such as direct material, direct labor or overhead.

Detailed explanation-3: -Standard cost systems make use of standard costs, which are the budgeted or estimated costs deemed to be necessary to manufacture a single unit of product or perform a single service. Standards are traditionally established for each component (material, labor, and overhead) of product cost.

Detailed explanation-4: -A standard costing system involves estimating the required costs of a production process. Standard costs are estimates of the actual costs in a company’s production process because actual costs cannot be known in advance. This helps a business to plan a budget.