Standard Cost Method
In case of this method all receipts of materials are recorded at the actual price paid but all issues are priced at a predetermined price which is termed as standard price.
The standard price is fixed for each material after taking into account factors such as quantity of materials to be purchased, market conditions, freight and warehouse expenses etc.
The chief advantages of this method are as follows:
(i) It is relatively easy to operate because all issues of materials are priced at the same price. A lot of clerical labour is saved.
(ii) The efficiency of the buying department can be judged. The method shows a profit or loss on issue because of standard price being higher or lower than the actual price paid. The difference between the standard price and actual price is known as ‘variance’. If the standard price is higher than the actual price the variance is termed as favourable and buying is regarded as efficient and vice versa.
(iii) It also helps in pre-determining the selling of the products.
The system is used mostly in industries which maintain their cost accounts on standard costing system. But it may be utilized in other industries too by pricing the material issues at a fixed price.
Services: - Standard Cost Method Homework | Standard Cost Method Homework Help | Standard Cost Method Homework Help Services | Live Standard Cost Method Homework Help | Standard Cost Method Homework Tutors | Online Standard Cost Method Homework Help | Standard Cost Method Tutors | Online Standard Cost Method Tutors | Standard Cost Method Homework Services | Standard Cost Method