ECONOMICS

Detailed explanation-1: -A standard is a unit amount, whereas a budget is a total amount. There could be instances where the production department is responsible for a direct materials price variance. A variance is the difference between actual costs and standard costs. Standard cost is the industry average cost for a particular item.

Detailed explanation-2: -Budgets are expressed in a total amount, normally for the period of a year. A standard is expressed at a unit amount and is normally used in manufacturing when trying to determine the cost of each unit produced and how much the company expects to sell it for.

Detailed explanation-3: -Standard costs are the expected unit-level costs. Budgets reflect total costs and may reflect bulk discounts or other variables. So, standards and budgets are not the same.

Detailed explanation-4: -Standard costs are estimates of the cost of goods sold–that is, the cost required to produce your products. They usually consist of three parts: direct materials, direct labor, and manufacturing overhead.

Detailed explanation-5: -A standard cost is more accurate than a budgeted cost. If standard costs are incorporated into the accounting system, it may simplify the costing of inventories and reduce clerical costs.