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Sunday, November 7, 2010

Advantages Of Standard Costing

The following are the advantages of the standard costing system:

* A standard costing is a rule of measurement established by authority, which provides a yardstick for performance evaluation.

* Standard costing system minimizes the wastage by detecting variance and suggesting for corrective actions.

* Under the standard costing system, cost centers are established and responsibility is assigned to the concerned departments and persons and thus it helps to increase the effective delegation of authority

* A properly developed standard costing system with full participation and involvement creates a positive, cost effective attitude through all levels of management.

* The standard system encourages reappraisals of methods, materials and techniques that help to reduce the unfavorable variances.

* The standard costing system helps to draw management's attention towards those items which are not proceeding according to plan.

* Standard costing system makes the whole organization cost-conscious as it gives the focus to the standard cost and variance analysis.

* Standard costing system provides a basis for incentive scheme to workers and supervisors.

* Standard costing system simplifies the cost control procedures.

* Standard costing acts as an effective tool for business planning, budgeting, marginal costing , inventory valuation etc.