Meaning of Standard Costing :-

Standard costing is a technique which uses standards for costs and revenues for
the purpose of control through variance analysis. Standard is a predetermined
measurable quantity set in defined conditions against which actual performance
can be compared, usually for an element of work, operation or activity. Standard
costing involves the setting of predetermined cost estimates in order to provide a
basis for comparison with actual costs. A standard cost is a planned cost for a unit
of product or service rendered. Standard costing is universally accepted as an
effective instrument for cost control in industries. Although the terms budgeted
and standard costs are sometimes used interchangeably, budgeted costs normally
describe the total planned costs for a number of products. Usually budgetary
control is operated with a system of standard costing because both systems are
interrelated but they are not interdependent.