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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Standard costing
Dear tutor,
What is standard costing, is it the same as traditional absorption costing?
Standard costing is using standards to product budgets (flexing where necessary) then that is usually followed up by comparing budget figures to actual figures so that variances can be calculated.
By using standards, u mean based on past experience and company’s policies to produce the budgets?
Is standard costing used to produce fixed budgets and flexible budgets as both budgets are for a period of 1 year?
There are variious ways to estimate standards, but they are usually set annually at what the company thinks should be achievable. Even ifmyou so notmusemthe word ‘standard’ you could not produce, say, a material cost budget withiut estimating the kg and $/kg for each unit. Those estimates are standards.
See the PM material if you need more on standards and standard costing..