ECONOMICS

Detailed explanation-1: -Standard cost is used to identify the variances between the actual cost incurred and the cost that should have occurred to produce the goods in normal conditions. Standard cost is a predetermined cost.

Detailed explanation-2: -I.C.M.A. Terminology defines Standard Cost as, “a predetermined cost, which is calculated from management standards of efficient operations and the relevant necessary expenditure. It may be used as a basis for price-fixing and for cost control through variance analysis”.

Detailed explanation-3: -A Standard Cost is a predetermined unit cost based on expected direct materials quantities and expected direct labour time, and priced at a predetermined rate per unit of direct materials and rate per direct labour hour and rate per hour of overhead.

Detailed explanation-4: -Standard costing is technique which is more useful in manufacturing industries. Bricks, cement, fertilizers, sugar etc are the type of industries in which standard costing is more useful.