What is Standard Costing?

Standard Costing is the most effective way to control costs. It provides criteria that can be used to evaluate and compare the operating performance of executives.Essentially, Standard Costing is a technique of cost calculation and control. Standard Costs are prepared and used to clarify the final results of a business.

What are budget costs?

Budget costs are estimated costs that are used only for planning or research purposes to understand the size of the company and make business decisions.

What are the similarities between budgeting and Standard Costing?

The similarities between budgeting and Standard Costing are the following:predetermined cost sandard costs are predetermined costs fixed according to estimates.Budgetary costs are also estimated costs.Advance costStandard Costs are estimated in advance and compared to actual costs.Budgetary costs are also estimated in advance and compared to actual costs.Both aim at cost controlStandard Costs are designed to control costs and improve efficiency.Budgetary costing also seeks to promote cost control and maximize employee efficiency.

What are the differences between budgeting and Standard Costing?

The differences between budgeting and Standard Costing are:baseStandard Costs are predetermined or planned costs.Budgetary costs are based on past experience.TechniqueStandard Costs are based on technical estimates.Budgetary costs are based on historical data and adjusted to the future.Scopethe standards are set for elements of cost.Budgets are prepared for every business activity.

What are their advantages over the other?

Standard Costing can be performed at any time or place.Budgeting confines the timing of costs to predetermined times only.Both are useful in budgeting for future earnings and expenses, present decision-making, and control over the existing operations.

Similarities and Differences of Budgeting and Standard Costing

Similarities Between Standard Costing and Budgetary Costing

Basis of Similarities	Standard Costing	Budgetary Costing
Predetermined cost	Standard costs are predetermined costs fixed according to estimates.	Budgetary costs are also estimated costs.
Advance cost	Standard costs are estimated in advance and compared to actual costs.	Budgetary costs are also estimated in advance and compared to actual costs.
Both aim at cost control	Standard costs are designed to control costs and improve efficiency.	Budgetary costing also seeks to promote cost control and maximize employee efficiency.
Cost comparison	Standard costs are designed well in advance and compared to actual costs.	These advanced estimated costs are compared to actual costs.
Reporting	Standard costs are periodically reported to top management.	Budgetary costs are also reported to management periodically.
Corrective action	Standard costing lays stress on identifying adverse variances and corrective actions are taken.	Budgetary control lays stress on identifying adverse variances.

Differences Between Standard Costing and Budgetary Costing

Basis of Difference	Standard Costing	Budgetary Costing
Base	Standard costs are predetermined or planned costs.	Budgetary costs are based on past experience.
Technique	Standard costs are based on technical estimates.	Budgetary costs are based on historical data and adjusted to the future.
Scope	The standards are set for elements of cost.	Budgets are prepared for every business activity.
Limited use	Standard costs can be used for estimation or forecasting.	Budgets are used for men, materials, and money.
Conditions	Standard costs are used in ideal conditions or situations.	Budgets are made and used in diverse conditions and situations.
Per unit	Standard costs can be calculated per unit.	Budgetary costs cannot be calculated on a per-unit basis.
Nature	Standards are set only for expenditure.	Budgets are compiled for both income and expenditure.
Coverage	Standard cost is not comprehensive (i.e., it is limited only to cost operations).	Budgetary cost coverage is significantly greater than standard cost coverage.
Parts	Standard costs cannot be specified in parts.	The budget can be in parts (only the cash budget).