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Standard Costing (Material, Labour & Overhead Variances)
What is Standard Costing?
is the management-accounting technique that pre-sets what costs ought to be, measures what costs actually were, and analyses the gap — the variance — to drive corrective action.
Simple Technique?
Only the variance between actual and standard is calculated — not a fresh cost build-up every period. The cost-accounting workload shrinks dramatically once standards are set.
Eliminates Inefficiencies & Wastages?
Each variance points to a specific cause — wrong supplier, inefficient operator, machine breakdown. Management can locate and eliminate the source rather than searching blindly.
Efficient Staff?
When operating staff know there is a published standard, they become more competitive to meet (and beat) it. Standards act as both a yardstick and a motivator.
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