Standard Costing Characteristics, Advantage, Disadvantages.

 Standard Costing is one of the important techniques of costing that is used by large scale and multinational company to maintain the standard of product oe service and sell product oe service at geniune price because they have to face maximum competition.

Definition-

According to CIMA-Standard costing is a control technique which compares standard cost and revenues with actual result to obtain variances which are used to minimize or control it and improve the performance of organization.

In the other words we can say that the process in which actual costs is incurred and compared with predefined cost to improve the efficiency of organization this process is called standard costing.

Characteristics-

1.It is a technique of cost control.

2.It belongs previous data to future data.

3.It compares actual cost to budget cost.

4.It finds out variance and control it.

5.It is a pre planned cost.

6.It defines the standard of product or service.

7.It also belongs processing process.

8.It is a tool to improve performance of organization.

Advantage-

1.It is a universal cost control technique.

2.It plays an important role in pricing process.

3.It also helps in production planning.

4.It also helps in making Budget.

5.It also helps to implement Management by exception approach.

6.It helps to measure the production and performance of organization.

7.It minimize wastage in production process.

8.It improves the managerial function of manager.

9.It also helps in the valuation of stock.

10.It motivates human resource force.

Disadvantage-

1.It is an expensive process.

2.It is time consuming process.

3.It is not beneficial for small scale firm, middle scale firm.

4.It is not useful for non standard product.

5.It is not useful in modern production process.

6.It is only applicable in production department.

7.It requires continue revision of product and production process.

8.It requires maximum technical knowledge to fix standard.

9.It cares only controllable variance.

10.It is not useful in service sector and other concern cervice sector.