Standard costing is a cost accounting and costing system using standard costs. "Standard" - the amount of costs required for the production of a unit of production; costing is the monetary value of these costs. The system appeared in America in the early 30s of the twentieth century, when the United States was going through an economic crisis.
The Standard Costing system is based on the following principles:
- · Preliminary regulation of costs by elements and cost items;
- · Drawing up normative calculations for the product and its components;
- · Separate accounting of standard costs and deviations;
- · Analysis of deviations;
- · Clarification of calculations when the norms change.
In this way:
The philosophy of the Standard Costing system is that forecast indicators are entered into the accounting, and not the results after the fact, and the deviations that have arisen are reflected separately. The management process is organized based on the analysis of the causes of these deviations and is reduced to their minimization.
The basic idea behind Standard Costing is to “anticipate” costs. The system requires you to set cost targets, and forces you to subordinate all activities to the achievement of these goals. Standard Costing requires a one-time, voluminous work on rationing, calculating and linking the results obtained with business goals, accepting and fixing the results of this work in the form of standards for a sufficiently significant period, and then focusing on achieving the set goals by analyzing the reasons for deviations from targets.
Cost rationing manager cost price pricing
The foundation of Standard Costing is the establishment of demonstrable norms for the consumption of materials, energy, working time, quantity and productivity of labor, wages and other costs associated with the manufacture of any product, semi-finished products at all stages of production. There are several approaches to the development of regulatory standards. In any case, the standards must have a completely clear and understandable justification, obtained as a result of engineering or technological calculations, or as a result of specially organized measurements. Differences in approaches relate to the issue of determining the values \u200b\u200bof the established standards. According to the most "stringent" approach, the standards are set in such a way that it is almost impossible to exceed them. Even 80% of them means successful work. If there was an overfulfillment of the norm, this means that the standards were set with a margin, that is, incorrectly, since a certain reserve of cost savings or productivity increases was hidden.
Standard costing algorithm
Organization of accounting in the Standard Costing system and its subsequent use involves a number of steps.
1. Selection of standard products
The selection of standard types is usually intended to reduce the amount of work on the development of standards for the entire assortment or standard size range of products. The standard type is chosen as the most common or possessing some characteristics of "basicity".
2. Preliminary classification of costs by item of expenditure.
This is a necessary measure in any system related to cost accounting and planning. If there are difficulties with attributing costs to a particular expense item, a strong-willed managerial decision is allowed. Further steps are carried out for each standard item.
3. All operations associated with the manufacture of the product are numbered.
It is assumed that production is already sufficiently structured and allows you to observe in sufficient detail the increase in the value of a product during the production process. If this is not the case, then it is necessary to divide the entire technological route that a standard product passes into sections, and if possible, then according to technological operations performed on individual pieces of equipment or separate workplaces. Operations are numbered or coded, and these codes later appear in the planning and accounting of costs transferred to the cost of the product in the course of the next technological operation.
4. Standards for resource consumption are developed for each technological operation.
The purpose of developing standards is to standardize as many different indicators as possible related to the cost of resources, the use of equipment at each technological operation. However, if at first the technological flow is structured only to the level of individual sections, then the standards are developed in relation to the consumption of resources by sections.
5. A list of piecework and time-based jobs is determined for this standard product.
At this stage, the types and nature of remuneration are determined. Production and productivity standards are calculated.
6. The cost of labor costs attributable to this standard product is calculated.
Time-based labor costs are calculated by multiplying the standard time required to complete the operation by the standard hourly rate.
7. Calculate the standard cost of materials used to produce a standard item as the product of the standard price and standard consumption.
As a rule, market prices calculated from the conditions of the ex-station of destination are used as standard.
- 8. The overhead allocation rate is determined. Depending on the complexity of the applied cost model, there are three options for determining the rate:
- · Common for the plant unified rate. It is used, for example, for factories with approximately equivalent workshops.
- · A special rate for each production unit. Usually this is a forced measure for the shops of factories with a complex production structure and large differences in the production technology of individual standard products.
- · A separate distribution rate for each main technological unit. Can be used for the highest precision in cost management.
- 9. Standards are calculated for other measures of cost and performance.
Standards are being developed for administrative, commercial expenses, etc. Depending on the required accuracy, the development can be carried out for aggregated indicators or item by item.
10. Cost standards are taken as a basis for planning production and procurement of resources.
This is usually one of the most difficult steps in the transition to Standard Costing. Provision planning, based on the adopted strict standards, is perceived by managers as a very risky step that can put the production program at risk of disruption. There is a desire to violate the standards for the volume of reserves, to hedge. And instead of saving due to the observance of specific indicators, you can get an overspending associated with overestimated volumes of working capital. It is interesting that the managers responsible for the material support of the business, in this case, are trying to hedge not so much themselves as their colleagues-producers, since they expect them to fail to meet the accepted cost standards. A rather provocative situation arises, since in addition to the expectation of non-compliance by personnel with standard norms, there are surplus resources available, and this completely demotivates production workers.
Meanwhile, the solution to the problem of providing resources for Standard Costing systems lies in a completely different plane. The objects of optimization for meeting the standards should be, first of all, the supply system and the organization of relationships with suppliers. The main role in optimization is assigned to modern supply management technologies, ensuring reliable supply with minimal inventory and overhead costs.
11. Cost standards are communicated to performers in all divisions and become the basis of all enterprise activities.
Comprehensive work is being carried out to clarify the need to use standards, their methods in daily activities: when ordering and consuming materials, when mastering the techniques of effective work, etc.
12. Material and non-material incentives for personnel are mainly linked to the performance of the production task and the level of approximation to standard costs.
The linking of material and non-material motivation of personnel to the fulfillment of the goals set to achieve standards in quality, productivity and economy is an essential element of the implementation of the Standard Costing system. Unfortunately, the authors have repeatedly stated that there is a significant discrepancy in production management practice between the targets for cost savings, increased labor efficiency and assessment criteria implemented in the incentive systems of enterprises.
13. In the course of accounting, all facts of deviations from the established standards are recorded.
Of course, this stage implies the functioning of a system of operational, managerial or production accounting at the enterprise, which makes it possible to record the appearance of deviations from standards. The accounting system should also make it possible to identify the cause of deviations, or at least collect the necessary amount of information to determine it using analytical methods.
14. All deviations are analyzed to identify the causes that led to them.
Deviation analysis is provided to managers either in the form of visual and systematic reports, or in the form of operational signal information related to an important resource or a significant amount of a noted deviation.
15. Management's attention is focused on eliminating the causes of deviations.
Critical peaks or recurring deviations are equally the focus of managers' attention. First, their efforts are aimed at eliminating the cause of the deviation, and only then, if an obvious error is recognized in establishing the standard according to which the deviations are systematic, proposals are developed to make appropriate adjustments to the standards.
16. When mastering new technological frontiers or reaching a new threshold of labor productivity, standards are revised.
The work on defining the standards for the Standard Costing system is done so thoroughly that the need to revise the standards arises no earlier than a year after the last revision. In our conditions, this mainly concerns the standards for the use of raw materials, materials, labor productivity. The organization of work to achieve indicators that meet the established standards, the development of new technological methods and processes, the development of productivity reserves and the growth of qualifications entail the need for periodic revision of these standards.
However, it should be remembered that the personnel motivation systems adopted to support Standard Costing will be effective only for a certain and sufficiently long period, during which the “rules of the game” remain unchanged. Frequent “raising the bar” demotivates staff by forcing them to hold onto their reserves. A calendar year can be an acceptable minimum period for most standards (of course, taking into account the necessary seasonal fluctuations in the standards). It is clear that standard prices should correspond to market realities and may be revised more often, for example, once a quarter.
Deviation analysis
As noted, the current work in the Standard Costing system consists of analyzing the causes of deviations and their elimination. The main problem in analyzing the causes of deviations in Standard Costing is to separate and separately assess the impact of each factor on the final results. Often, deviations affect both prices and consumption of resources, and indicators of labor productivity. Deviations can occur in different parts of the production process, and a deviation at one stage of value creation can be the result of a deviation at another stage. The main efforts in the analysis of deviations are aimed at correctly assessing the contribution of each of the deviations to the total.
General analysis of deviations is performed in the following order.
- 1. Determination of material deviations:
- · Deviation due to prices;
- · Deviation due to specific consumption for actual output;
- · The cumulative variance for materials (the difference between the actual costs of the material and the standard, taking into account the actual production).
- 2. Identification of deviations in the wages of the main production workers from the standard:
- · Deviation in the wage rate;
- · Performance deviation;
- · Cumulative deviation of the actually accrued wages from its standard value.
- 3. Identification of deviations from the norms of actual general production costs (ODA):
- · Calculation of the standard rate of permanent ODA;
- · Calculation of the standard rate of variable ODA;
- Adjustment of the estimated ODA, taking into account the actually achieved volume of output, analysis of their deviations depending on the influence of factors:
ь due to deviations in production volumes;
l deviations in the actual constant ODA from the estimated; time deviations of the work of the main production workers;
ь due to the actual differences between the ODA and the estimated (deviation of the ODA variables in terms of efficiency).
- 4. Analysis of deviations of the actual profit from the estimated:
- · Analysis of the cumulative deviation;
- · Analysis of the deviation of profit due to selling prices;
- · Analysis of the deviation of profits due to sales volumes.
- 5. Analysis of deviations in other, defined as standard, production parameters (such as quality, service, number of customers and others). Accounting for deviations due to changes in the norms is not kept, since the current change in the norms is not expected.
Criticism of standard costing
Standard Costing, as a complex and multifaceted system for managing the economy of an enterprise, could not but come into conflict with other management systems that are used in parallel at the enterprise to organize any other aspects of its activities. Most of the criticisms in relation to Standard Costing concern the very essence of introducing standards, as limiting the degree of freedom in costs, productivity. However, organizational trade-offs can easily address these concerns. Here are the most common complaints about the Standard Costing system:
- o often deviations are too aggregated, not related to technological areas, individual orders or batches of products;
- o Standard Costing may differ from the philosophy of the cost management system and ABC;
- o focuses a lot on labor costs and productivity;
- o in the case of a short product life cycle, the standards are applicable only for a short period of time; a lot of attention is focused on minimizing costs, rather than improving product quality or fulfilling customer requests;
- o does not cover all aspects of increasing production efficiency.
The advantages of the method:
But I would like to emphasize the advantages of Standard Costing again. First of all, they are that this approach:
- § Provides a solid basis for identifying significant variances in cost comparisons;
- § guarantees an increase in labor productivity and, as a result, stimulates the activities of workers through a system of material incentives;
- § motivates employees to adhere to standards;
- § provides a more stable production cost.
- § Sources of savings in Standard Costing are:
- § identification of removable losses (unfavorable deviations) that reduce the profit of the enterprise;
- § providing managers with accurate and timely data on the cost of production for sales planning and pricing;
- § minimization of accounting work associated with the calculation;
- § stimulating the work of the entire team to achieve the set goals; personification of responsibility for costs.
The introduction of the Standard Costing cost management system allows us to successfully solve the problem of achieving the target, pre-calculated, product cost. In addition, the problems of current control of costs in the production process are solved, the reasons for deviations from the set goals are identified, and new savings are developed.
System "Standard-cost" - for domestic accounting is a new method of regulatory cost accounting.
The name "Standard-cost" in a broad sense means the cost price set in advance (as opposed to the cost price, which data is collected). The meaning of the system "Standard-cost" is that what should happen, and not what should happen, what happened is taken into account not the existent, but the due, and the deviations that have arisen are reflected separately.
The main task that this system sets itself is to take into account losses and deviations in the company's profits. It is based on a clear, firm establishment of norms for the costs of materials, energy, additional time, labor, costs and all other costs associated with the manufacture of any product or semi-finished products. Moreover, the established norms cannot be exceeded. Fulfilling them even by 80% means successful work. Exceeding the norm means that it was set incorrectly.
Comparison of the normative cost accounting method with the "Standard-cost" system allows drawing the following conclusions: both methods take into account costs within the norms; both methods assume full cost accounting; in accounting according to the "Standard-cost" method, expenses in excess of the established norms are attributed to the perpetrators or overhead costs are attributed to each individual order or to the produced batch of products.
If the order is presented as a single item, then its cost is calculated by summing all costs. If the order provides for the production of several products or their batches, then by summing the costs, the cost of the entire batch is obtained.
The term "direct-costing" means "direct costing". This term does not fully reflect the essence of this cost accounting method, since the main element of this method is the organization of separate accounting of variable and fixed costs and the use of its advantages in order to improve management efficiency. Therefore, the direct cost accounting system is often called variable costing - "variable cost accounting."
The main characteristic of direct costing is the division of costs into fixed and variable costs depending on the change in production volume. The main feature of direct costing is that the cost of industrial products is taken into account and planned only in terms of variable costs. Fixed costs are collected on a separate account and, at a specified frequency, are written off directly to the debit of the financial results account, for example, "Profit and loss", that is, they are referred to the financial result of the enterprise. Thus, fixed costs are not included in the calculation of the cost of goods, but are written off from the profit received during the period in which they were made.
In the cost accounting system based on the direct costing method, there are two main financial indicators: profit margin and profit. In this case, the sub-margin income is understood as the difference between revenue and variable costs. Marginal income includes operating income and fixed costs.
The relationship between the performance indicators of the enterprise within the marginal approach is as follows:
- proceeds from the sale of products (B);
- variable costs (Zper);
- marginal income (MD \u003d B - Zpe);
- fixed costs.
The modern direct costing system offers two accounting options:
- simple direct costing, in which only direct variable costs are taken into account in the cost price;
- developed direct costing, in which both direct variables and indirect variable general business expenses are included in the prime cost.
More recently, the main problem of accounting for Ukrainian enterprises was the problem of organizing more or less reliable accounting. The accounting methodology, as well as the issue of its efficiency, were somewhere in the background among the management priorities.
It was considered the most important to obtain reliable data on accounts receivable and payable, the state of stocks of critical types of resources and work in progress, and the volume of products ready for sale. Previously, it was quite acceptable to receive this data at least monthly and in an accounting interpretation (this is often the goal when the accounting system was formed). Managers used the data of such accounting to reconcile with certain indicators of the business, which was being managed, often based on completely different information received and organized.
Accordingly, the accounting system had a rather insignificant degree of influence on management decisions. As the problems with the organization of accounting were solved, the issues of its quality and efficiency became more and more urgent. This was required by the work of managers in a significantly changed business environment. Economic information acquired more and more weight in making management decisions. Today, accurate, but somewhat delayed information is of much lesser importance compared to data rounded within acceptable limits, but operational and timely. And the main requirement for such data is that it must be presented in such a way that it would be possible to build strategic decisions on its basis.
Permanent debriefing, a favorite managerial technique of the recent past, is now being actively replaced by forecasting, calculating options and analyzing deviations from plans directly at the re-planning stage. This is confirmed by the constantly growing demand for budget management systems and consulting in this area, the desire to form internal corporate cost standards, economic and financial unification of structural divisions of companies. Planning the work of an enterprise with a predictable behavior of costs becomes much more efficient than collecting information for drawing up estimates for each scenario of production and sales of products.
The greatest certainty about future costs is provided by the management system Standard Costing... This system appeared and was formed in the first decades of the last century, when the dominant problems in production were labor productivity and its unification. For the first mass-market products, the Standard Costing system made it possible to successfully solve the important task of achieving the target, pre-calculated production cost. In addition, within the framework of the system, the problems of current cost control in the production process, identifying the reasons for deviations from the set goals, and developing new savings reserves were successfully solved.
The essence of STANDARD COSTING
The idea behind Standard Costing is simple and based on the fact that most modern technologies are very stable and predictable at their core. If the technology is followed, the guarantees of obtaining quality products are very high. Stable technology allows us to speak with a high degree of certainty about the volumes of use of resources (raw materials, materials, energy carriers, labor, services) at various stages of processing. To determine the costs that will be incurred in production, the resource prices must be added to this information, and thus the cost of the resulting products can be calculated in advance. Standard Costing helps to make one important addition to this - in this calculation of the cost price it is proposed to apply the best indicators for the use of resources and attainable prices for them, giving such a cost price a goal-setting character.
Cost planning in the Standard Costing system is akin to engineering design, since costs must be closely linked to the technological process. Nowadays, the opposite situation is also becoming common, when engineers, at the stage of product development, are given strict frameworks for the future cost of a new product ( target costing system).
The antipode of the Standard Costing system can be called the calculation of costs immediately before or during the production process, or the calculation of costs for finished products. To calculate such a cost, it is necessary to collect various information without a certain preliminary idea of \u200b\u200bits content, often in fact, already incurred costs, or costs that are almost impossible to quickly adjust. Unfortunately, planning costs without setting firm standards leaves a lot of variability, because of which the result of calculations does not always correspond to the expectations of managers, who took into account the combination of completely different prices and volumes of resource use when making decisions.
The basic idea behind Standard Costing is to “anticipate” costs. The system requires you to set cost targets, and forces you to subordinate all activities to achieve these goals. Standard Costing requires a one-time, voluminous work to standardize, calculate and link the results obtained with business goals, accept and fix the results of this work in the form of standards for a sufficiently significant period, and then focus on achieving the set goals by analyzing the causes of deviations from the targets.
Meaning and main task
It is important to emphasize that Standard Costing is not only an approach to planning and cost accounting, but also an approach to business management, especially its production part. Significant certainty appears in production, both in matters of the state of the semi-finished product during its movement along the technological flow, and in the structure of work in progress, the results of the work of procurement departments and the state of production backlog. At any time, you can accurately estimate the current costs incurred for the implementation of the production program, regardless of the degree of product readiness. All the attention of operations managers is focused on deviations in schedules, quantities and cost indications from the production target.
The philosophy of the Standard Costing system is that forecast indicators are entered into the accounting, and not the results after the fact, and the deviations that have arisen are reflected separately. The management process is organized based on the analysis of the causes of these deviations and is reduced to their minimization.
Rationing The foundation of Standard Costing is a clear establishment of demonstrable norms for the consumption of materials, energy, working time, quantity and productivity of labor, wages and other costs associated with the manufacture of any product, semi-finished products at all stages of the production cycle.
There are several approaches to the development of regulatory standards. In any case, the standards should have a completely clear and understandable justification, obtained as a result of engineering or technological calculations, or as a result of specially organized measurements.
Differences in approaches relate to the issue of determining the values \u200b\u200bof the established standards. According to the most "stringent" approach, the standards are set in such a way that it is almost impossible to overfulfill them. Even 80% of them means successful work. If there was an overfulfillment of the norm, this means that the standards were set with a margin, that is, incorrectly, since a certain reserve of cost savings or productivity increases was hidden. The calculation given in table. 1, illustrates the system of evidence used in the development of "rigid" standards. Suppose you estimate the time it takes a worker to make one part on a machine. Separately, measurements are taken of the time for the preparatory and final operations, and the time for directly processing the part. The measurement results are summarized in a table, which, for clarity of our example, contains information about only five measurements.
Table 1. Example of calculating standards
Values \u200b\u200bare highlighted in green in the table, which are taken into account in a rigid approach to the development of standards. As you can see, the best results were selected for each operation, totaling 510 seconds. Although it cannot be called absolute, there is a high motivating and mobilizing component of such a “strict” standard.
The development of the so-called “ideal” standards is based on the idea of \u200b\u200bworking in a somewhat idealized production situation: the highest productivity, the lowest prices for raw materials, the highest quality of all resources, the absence of defects and losses due to the fault of personnel, and the absence of production disruptions. With regard to our example of determining the production time of a part on a machine, the developer of the “ideal” standard would rather use the calculation or recommendation of an ergonomist.
At the other extreme in standards development are the “realistically achievable” guidelines that result from averaging the best performance. Table 1 material for calculation is highlighted in yellow (these are the three best average indicators), and the averaging result will be 592 seconds in this case.
There are many supporters of "practical" standards, which are developed on the basis of averaging of common indicators. Table 1, the entire last column will serve as the material for calculating such a "practical" indicator, and the result will be 636 seconds.
Approximately also, in each of the approaches, the consumption of materials and their prices are justified.
The standards resulting from the "hard" approach seem to the authors to be the most consistent with the goal-setting spirit of Standard Costing, since they are based on already demonstrated achievements, and at the same time, they provide an idea of \u200b\u200bthe marginal totals in costs and profitability of the business.
STANDARD COSTING algorithm
Organization of accounting in the Standard Costing system and its subsequent use involves a number of steps.
1. Selection of standard products... The selection of standard types is usually intended to reduce the amount of work on the development of standards for the entire assortment or standard size range of products. The standard type is chosen as the most widespread or possessing certain characteristics of "basicity".
2. Preliminary classification of costs by item of expenditure... This is a necessary measure in any system related to cost accounting and planning. If there are difficulties in attributing costs to a particular expense item, a strong-willed managerial decision is allowed.
Further steps are carried out for each standard item.
3. All operations associated with the manufacture of the product are numbered.... It is assumed that production is already sufficiently structured and allows you to observe in sufficient detail the increase in the value of a product during the production process. If this is not the case, then it is necessary to divide the entire technological route that a standard product passes into sections, and if possible, then according to technological operations performed on individual pieces of equipment or separate workplaces. Operations are numbered or coded, and these codes later appear in the planning and accounting of costs transferred to the cost of the product in the course of the next technological operation.
4. Standards of resource consumption are developed for each technological operation... The purpose of developing standards is to standardize as many different indicators as possible related to the cost of resources, the use of equipment at each technological operation. However, if at first the technological flow is structured only to the level of individual sections, then the standards are developed in relation to the consumption of resources by sections.
5. A list of piecework and time-based work is determined for this standard product... At this stage, the types and nature of remuneration are determined. Production and productivity standards are calculated.
6. The cost of labor costs attributable to this standard product is calculated... Time-based labor costs are calculated by multiplying the standard time required to complete the operation by the standard hourly rate.
7. Calculate the standard cost of materials used to produce a standard item as the product of the standard price and standard consumption. As a rule, market prices calculated from the conditions of the ex-station of destination are used as standard.
8. The rate of distribution of indirect costs is determined... Depending on the complexity of the applied cost model, there are three options for determining the rate:
- common for the plant unified rate. It is used, for example, for factories with approximately equivalent workshops.
- special rate for each production unit. Usually this is a forced measure for the shops of factories with a complex production structure and large differences in the production technology of individual standard products.
- separate distribution rate for each main technological unit. Can be used to achieve the highest precision in cost management.
9. Standards are calculated for other indicators of costs and performance... Standards are being developed for administrative, commercial expenses, etc. Depending on the required accuracy, the development can be carried out for aggregated indicators or item by item.
10. Cost standards are taken as a basis for planning production and procurement of resources... This is usually one of the most difficult steps in the transition to Standard Costing. Provision planning, based on the adopted strict standards, is perceived by managers as a very risky step that can expose the production program to the threat of disruption.
There is a desire to violate the standards for the volume of reserves, to hedge. And instead of saving due to compliance with specific indicators, you can get an overspending associated with overestimated volumes of working capital.
It is interesting that the managers responsible for the material support of the business, in this case, are trying to insure not so much themselves as their colleagues from production departments, since they expect them to fail to meet the accepted cost standards. A rather provocative situation arises, since in addition to the expectation of non-compliance by personnel with standard norms, there are surplus resources available, and this completely demotivates production workers.
Meanwhile, the solution to the problem of providing resources for Standard Costing systems lies in a completely different plane. The objects of optimization for meeting the standards should be, first of all, the supply system and the organization of relationships with suppliers. The main role in optimization is assigned to modern supply management technologies, ensuring reliable supply with minimal inventory and overhead costs.
11. Cost standards are brought to the attention of performers in all departments and become the basis of all enterprise activities... Comprehensive work is being done to explain to staff the need to use standards and their methods in their daily activities: when ordering and consuming materials, when mastering effective work techniques, etc.
12. Material and non-material incentives for personnel are mainly linked to the performance of the production task and the level of approximation to standard costs... The linking of material and non-material motivation of personnel to the fulfillment of the set goals to achieve standards in quality, productivity and economy is an essential element of the implementation of the Standard Costing system. Unfortunately, the authors have repeatedly stated that there is a significant discrepancy in production management practice between the targets for cost savings, increased labor efficiency and assessment criteria implemented in the incentive systems of enterprises.
13. In the course of accounting, all facts of deviations from the established standards are recorded... Of course, this stage implies the functioning of a system of operational, managerial or production accounting at the enterprise, which makes it possible to record the appearance of deviations from standards. The accounting system should also make it possible to identify the cause of deviations, or at least collect the necessary amount of information to determine it using analytical methods.
14. All deviations are analyzed in order to identify the causes that led to them.... Deviation analysis is provided to managers either in the form of visual and systematic reports, or in the form of operational signal information related to an important resource or significant magnitude of the noted deviation.
15. Management focuses on eliminating the causes of deviations... Critical peaks or recurring deviations are equally the focus of managers' attention. First, their efforts are aimed at eliminating the cause of the deviation, and only then, if an obvious error is recognized in establishing the standard according to which the deviations are systematic, proposals are developed for making appropriate adjustments to the standards.
16. When mastering new technological frontiers or reaching a new threshold of labor productivity, standards are revised... The work on defining the standards for the Standard Costing system is done so thoroughly that the need to revise the standards arises no earlier than a year after the last revision. In our conditions, this mainly concerns the standards for the use of raw materials, materials, labor productivity. The organization of work to achieve indicators that meet the established standards, the development of new technological methods and processes, the development of productivity reserves and the growth of qualifications entail the need for periodic revision of these standards.
However, it should be remembered that the personnel motivation systems adopted to support Standard Costing will be effective only for a certain and sufficiently long period, during which the “rules of the game” remain unchanged. Frequent “raising the bar” demotivates staff by forcing them to hold onto their reserves. A calendar year can be an acceptable minimum period for most standards (naturally, taking into account the necessary seasonal fluctuations in the standards).
It is clear that standard prices must correspond to the realities of the market and can be revised somewhat more often, for example, once a quarter.
Deviation analysis As already noted, the current work in Standard Costing consists of analyzing the causes of deviations and their elimination. The main problem in analyzing the causes of deviations in Standard Costing is to separate and separately assess the impact of each factor on the final results.
Often, deviations affect both prices, and the volume of consumption of resources, and indicators of labor productivity. Deviations can occur in different parts of the production process, and a deviation at one stage of value creation can be the result of a deviation at another stage.
The main efforts in the analysis of deviations are aimed at correctly assessing the contribution of each of the deviations to the total.
The general scheme for the analysis of deviations using the example of variable production costs is shown in Fig. one.
General analysis of deviations is performed in the following order.
1. Determination of material deviations:
- deviation due to prices;
- deviation due to specific consumption for actual output;
- cumulative material variance (difference between actual material costs and standard costs, taking into account actual production).
2. Identification of deviations in the wages of the main production workers from the standard:
- deviation in the wage rate;
- performance deviation;
- the cumulative deviation of the actually accrued wages from its standard value.
3. Identification of deviations from the norms of actual general production costs (ODA):
- calculation of the standard rate of permanent ODA;
- calculation of the standard rate of variable ODA;
- adjustment of the estimated ODA taking into account the actually achieved volume of output, analysis of their deviations depending on the influence of factors:
- due to deviations in production volumes;
- deviations in the actual constant ODA from the estimated;
- time deviations of the work of the main production workers;
- due to actual differences in ODA from estimated (deviation of ODA variables in terms of efficiency).
4. Analysis of deviations of the actual profit from the estimated:
- analysis of cumulative variance;
- analysis of the deviation of profits due to selling prices;
- analysis of the deviation of profits due to sales volumes.
5. Analysis of deviations in other, defined as standard, production parameters (quality, service, number of customers, etc.)... Accounting for deviations due to changes in the norms is not kept, since the current change in the norms is not expected.
The analysis of deviations can be presented in the form of a summary table of analysis of the reasons for deviations of the actual profit from the estimated one (Table 2).
Tab. 2. Analysis of the reasons for deviations of the actual profit from the estimated
| thousand UAH | |||
| Estimated profit | 8630 | ||
| Sales variances: | |||
| by average volume per order - 31 | |||
| Deviations in quality: | |||
| Deviations for straight materials: | |||
| Deviations in direct wages: | |||
| Variation for variable production overheads: | |||
| Variation in fixed production overheads: | |||
Responsibility for deviations
The idea of \u200b\u200bpersonalizing responsibility for deviations from cost standards is also an important part of the Standard Costing system. Costs in excess of the established norms by categories of direct costs are attributed to the perpetrators or to the results of financial and economic activities, and are not included in production costs. Deviations from the norms of indirect costs are identified taking into account production volumes and are referred to financial results.
Standard costs, budgets based on them and deviations from accepted standards are used to assess the work of employees and divisions of the enterprise. They can have a significant impact on the course of events when it comes to raising wages and moving up the career ladder. The influence of managers and workers on cost deviations is illustrated in Fig. 2, showing the qualitative assessment criteria that can be applied in relation to their work.
Criticism of STANDARD COSTING
Standard Costing, as a complex and multifaceted system for managing the economy of an enterprise, could not but come into conflict with other management systems used in parallel at the enterprise to organize any other aspects of its activities. Most of the criticisms in relation to Standard Costing concern the very essence of introducing standards, as limiting the degree of freedom in costs, productivity. However, organizational tradeoffs can easily address these concerns.
Here are the most common complaints about the Standard Costing system:
- deviations are often too aggregated, not related to technological areas, individual orders or batches of products;
- Standard Costing may diverge from the philosophy of cost management and ABC;
- focuses a lot on cost and productivity;
- in the case of a short product life cycle, the standards are applicable only for a short period of time;
- a lot of attention is focused on minimizing costs, rather than improving product quality or fulfilling customer requests;
- does not cover all aspects of increasing production efficiency.
Considering the typical activities of a modern Ukrainian industrial enterprise, one can make sure that the above claims are not yet relevant and in no way can diminish the importance of obtaining certainty and controllability in business costs.
Once again about the benefits But I would like to emphasize the advantages of Standard Costing again. First of all, they are that this approach:
- provides a solid basis for identifying significant variances in cost comparisons;
- guarantees an increase in labor productivity and, as a result, stimulates the activities of workers through a system of material incentives;
- motivates employees to adhere to standards;
- provides a more stable production cost.
Sources of savings in Standard Costing are:
- identification of removable losses (unfavorable deviations) that reduce the profit of the enterprise;
- providing managers with accurate and timely data on product costs for sales planning and pricing;
- minimization of accounting work associated with calculation;
- stimulating the work of the entire team of the enterprise to achieve the set goals;
- personification of responsibility for costs.
You should think carefully about how to resolve the trade-off between the stated disadvantages and advantages.
Ministry of Education of the Russian Federation
Syktyvkar Forestry Institute
St. Petersburg State Forestry
academy named after S. M. Kirov
Faculty of Economics and Management
Department of Accounting, Analysis, Auditing and Taxation
COURSE WORK
In the discipline "Accounting"
on the topic: "Accounting for production costs in the system
"Standard costing"
Syktyvkar 2005
INTRODUCTION
1. 3. Similarities and differences between the "Standard-Costing" accounting system and domestic regulatory production accounting
CHAPTER 2. THEORETICAL BASIS OF COST ACCOUNTING SYSTEM "STANDARD-COSTING"
2.1. Characteristics of the accounting system "Standard-costing"
2.2. Scheme of accounts in the "Standard Costing" system
CONCLUSION
BIBLIOGRAPHIC LIST
ANNEXES
INTRODUCTION
The main motive of any firm's activity in market conditions is profit maximization. The possibilities of realizing this strategic goal are limited in all cases by production costs and the demand for the products manufactured by the company. Since costs are the main constraint and at the same time the main factor affecting the volume of supply, the decision by the company's management is impossible without analyzing the existing costs and their size for the future. This applies to the release of already mastered products and the transition to new products.
One of the most effective tools in enterprise cost management is the "Standard Costing" accounting system, which is based on the principle of accounting and cost control within the established norms and standards and deviations from them.
The system "Standard-costing" entered the theory of domestic accounting in 1933 in connection with the publication of the translation of the book by Charles Harrison "Standard-costing". In the book by another American economist T. Downey, published a year later, "Standard Costing in System Accounting", a simplified version of this system was considered, methods and techniques of accounting entries in a stable estimate and with their subsequent adjustment to bring accounting results to the actual level were described, i.e. ... a system of accounting for production costs was proposed, using the principle of deviations and correction factors only in the final figures, in order to more clearly separate the costs due to the production activities of the enterprise from all others. The accounting system proposed by him provided for the presence of preliminary calculation, but did not need to address the detailed issues of organizing production, which were raised by C. Harrison.
In light of the designated problem, the purpose of this course work is:
§ classification of cost accounting methods
§ characteristic of rationing in cost accounting
§ identification and analysis of similarities and differences between the accounting system "Standard-Costing" and domestic regulatory accounting of production costs
§ characteristics of the "Standard-costing" system
§ identifying the features of accounts in the "Standard Costing" system
CHAPTER 1. COST ACCOUNTING METHODS IN PRODUCTION
1.1. Classification of cost accounting methods
The organization of analytical cost accounting is determined by the form of ownership, economic, legal, technical, technological and other factors, as well as the competence of managers and their need for one or another management information.
There are different ways of accounting for production costs and calculating the cost of production. Their use is determined by the peculiarities of the production process, the nature of the products (works, services) produced, their composition, and the method of processing.
According to accounting objects, there are process-by-process, by-pass and custom-made accounting methods.
The process-by-process method is usually used in mass production. The alternating method is used in industries with serial and continuous production, when the same products pass in a certain sequence through the same production stages. The peculiarity of this accounting method is that the main costs are reflected not by the types of production or products, but by the limits (stages) of production. As a result of the sequential passage of all redistributions, a finished product (finished product) is obtained.
The custom-made method of cost accounting is used in the manufacture of a unique product or on a special order. The accounting and costing object in this case is a separate production order, the actual cost of which is determined after it has been completed. Up to this point, all costs are considered work in progress.
Depending on the efficiency of accounting and cost control, there are distinguished methods of accounting for actual costs (historical) and accounting for standard costs. Both methods are aimed at identifying and reflecting the actual cost of production, but the first is through direct cost accounting, and the second is through deviations from the norms.
Accounting for actual costs is a method of sequential accumulation of information about actually incurred costs without reflecting in the accounting data on their value according to the current standards. However, this method has drawbacks, the main one of which is the inability to quickly identify losses and eliminate them. In modern conditions, the normative method of accounting for costs is more progressive, providing high efficiency in obtaining accounting data, their analytical nature and the accuracy of calculating the cost.
When using the standard method, a preliminary standard calculation is drawn up for each type of product. The calculation is carried out at the beginning of the reporting period and allows you to determine the amount of costs that at the time of the calculation (based on the technical level of production and the adopted technology) are necessary for the production of a unit of production, taking into account the current norms and standards. With the correct organization of the technological process, the actual production costs should not exceed the standard. Deviation from the standard cost may be the result of a violation of production technology or the discovery of hidden reserves.
Cost accounting under the standard method is organized in such a way that all operating costs are subdivided into costs according to the norms and deviations from the norms. Information about the identified deviations allows you to manage the cost of production and calculate the actual cost by adding (subtracting) to the standard value of the corresponding share of deviations from the norms for each item. Regulatory cost accounting allows you to regularly analyze the causes of deviations and identify the perpetrators.
Abroad, developed countries use the "Standard Costing" accounting system, which is close to the normative method. It is based on strict rationing of all costs and allows you to calculate the "standard" cost of products (works, services). Records and detailed analysis of the deviations that arise are kept with the assignment of responsibility for unfavorable deviations to the heads of departments.
1.2. Rationing in cost accounting
In 1931, the Institute of Management Engineering undertook a detailed study of possible ways of implementation and practical application of the "Standard Costing" system in our country. A great contribution to the solution of this issue was made by E.G. Lieberman, M.Kh. Zhebrak, presenting this system in a modified form as a normative method of cost accounting.
The domestic system of regulatory accounting for production assumes compliance with the following principles:
1. drawing up a preliminary calculation of the standard cost for each product based on the norms and estimates in force at the beginning of the month;
2. keeping records of changes in existing norms during the month to adjust the standard cost at the beginning of the next month, determining the impact of these changes on the cost of production and the effectiveness of measures that caused the change in norms;
3. documenting the actual costs during the month with their division into costs according to norms and deviations from norms;
4. determination of the causes and culprits of the identified deviations from the norms for the adoption of operational measures of influence;
5. Determination of the actual cost of manufactured products as an algebraic sum of the standard cost, deviations from the norms and changes in the norms.
Consequently, the most important elements of regulatory accounting are: calculation of the standard cost; taking into account changes in norms; accounting for deviations from the norms; calculation of the actual cost of production (work).
Calculation of the standard cost. The standard cost is one of the types of preliminary cost and determines the amount of costs for a product by items according to the norms and estimates in force at the beginning of the month.
The basis for calculating the standard cost is the creation of a regulatory framework, representing a set of all tasks, standards, norms and estimates that are used to plan and control the production process.
A prerequisite for the introduction of regulatory accounting is the organization of a regulatory economy, which includes the classification of standards, their coding and use in the daily work of planning, accounting, control and analysis. To organize the regulatory economy of a production enterprise, it is necessary to know well the technology and organization of the production of products, technical and technological documentation, technical conditions and GOSTs, in which cost rates are fixed. A properly organized normative economy contributes to an increase in the technological and organizational level of the economic link, the search for reserves for increasing the volume of production, an increase in labor productivity, a decrease in production costs, and an increase in profitability and profit. A unified classification of norms should provide the ability to compare and analyze the results of observations in order to identify reserves and eliminate deficiencies.
The norms are in constant motion: some norms are canceled and excluded, others are reintroduced, and still others are changed. All these changes must be timely reflected in the regulatory documents and brought to the appropriate authorities.
Calculations of the standard cost are compiled on the basis of the regulatory framework and are used to assess the monthly output of products by shops and the enterprise as a whole, to assess product rejects and work-in-progress. In addition, a comparison of the standard cost with the planned one makes it possible to judge the degree of achievement of the established targets at the cost.
In industries and industries where changes in norms are insignificant, the planned cost is used instead of the normative one.
Accounting for changes in norms. The standard cost of production is a calculated value established on the basis of the current consumption rates of individual cost elements. However, it will meet its purpose only if the normative calculation and technical documentation are the same norms. Therefore, the timely introduction of all changes in the norms in both technical and regulatory documentation is important for the correct functioning of the regulatory accounting of production costs.
Control over changes in the norms should be carried out by those services that are entrusted with the responsibility of drawing up (calculating) them. Any change in the norms must be approved by the chief engineer (head of the enterprise or his deputy).
A systematic change in the existing norms at enterprises occurs as a result of measures to accelerate scientific and technological progress, proposals of innovators and inventors, improve the organization of production, improve the qualifications of workers, which leads to the replacement of used materials, a reduction in cost rates, and a decrease in labor intensity of manufacturing products.
As the activities are carried out according to the plan of scientific and technological progress or organizational measures, an engineering and economic calculation of the rate of consumption of materials or the rate of time for a technological operation is performed. After the approval of the new standards, the relevant services issue notices of changes in the standards, which are transmitted to the shops, the department of material and technical supply and the planning and economic department. The notices indicate the norm before and after the change, the basis for the change and its reason, from what date the norm is put into effect. The norms of time and the rates at which the workers are paid are agreed upon with the committee of the trade union before their introduction. If the rates change for a significant number of operations, then a statement of the rate change is issued.
Usually, new norms come into effect from the beginning of the next month. However, this rule should not be formal: if there are reasons to reduce the cost rate, and it is still far from the end of the month, it is advisable to make changes in the middle of the month.
All notifications of changes in the norms are subject to registration in the planning and economic department (bureau of normative economy) for the departments and services that issued them, which is necessary to control the completeness of the receipt of notifications and the subsequent correct assessment of the magnitude of these changes.
Based on the notifications, changes are made to the standard calculation cards. In this case, the reflection of the changes is made in the columns of the valid cards previously provided for this, and not by correcting the previous norms.
To calculate and analyze the economic efficiency of organizational and technical measures and assess their results, the planning and economic department should keep an operational record of changes in norms for measures, reasons, performers. For this, it is advisable to use special cards for recording changes in norms for certain types of products and products, as well as a statement of accounting for the implementation of the plan of organizational and technical measures.
Accounting for deviations from the norms. All deviations of the actual costs for any item from the current norms are considered as deviations from the norms. This approach allows not only to organize reliable accounting of costs and calculation of the cost of production, but also to systematically analyze deviations from the norms in order to promptly influence the process of forming the cost.
Deviations are cost overruns or savings when comparing actual costs with the established norms for the use of raw materials and materials in production and labor remuneration, as well as all kinds of additional payments caused by organizational and technical problems. These also include deviations from the estimates for the maintenance of production and management.
Accounting for deviations from the norms is the most difficult in the organization and maintenance of regulatory accounting of production costs. To take into account deviations at all stages, stages and phases of production from the moment of identification and registration to inclusion in the cost of a calculation unit of production, it is necessary to solve a number of methodological and organizational issues, which include: selection of accounting nomenclatures (places, types, reasons for deviation) and their classification; organization of primary accounting (documentation) of deviations; current accounting of deviations; summation of deviations by cost centers (groupings, regroupings, vaults); Calculation of the share of deviations in the cost of the costing unit.
According to the degree of completeness of implementation and execution of documents, deviations from the standards are divided into documented and undocumented.
Documented deviations include deviations identified according to the data of the primary signal documentation before the start of the production process or during its implementation, as well as determined by calculation (before the start of the production process or immediately after the end of the production process or the reporting period). In this case, the period for which deviations are detected by calculation should be as minimal as possible (up to a shift).
Undocumented deviations are the difference between the total amount of deviations from the norms of costs (defined as the difference between the actual costs and costs according to the norms) and their documented part. Usually they are the result of an inaccuracy in the calculation of documented deviations, shortcomings in the organization of the supply and replacement of raw materials and materials, unregistered and hidden defects, various kinds of postings, shortages, losses, damage to semi-finished products and products, the use of unequal estimates in standard calculations and current accounting, inaccuracies determination of the remainders of work in progress and its assessment.
A significant amount of undocumented deviations indicates the presence of shortcomings in the organization of production, as well as in the accounting for deviations from the norms of costs in the production process.
Negative deviations represent cost overruns and indicate certain violations in technology, organization and production management.
Positive deviations are the result of measures aimed at reducing costs, achieving savings in production costs.
Conditional deviations can be negative and positive due to differences in the methodology for drawing up planned and standard cost estimates.
Analytical accounting of deviations from the norms is carried out by places of origin, reasons and culprits, by types of products.
The calculation of the actual cost of production (work) under the conditions of normative accounting of production is carried out on the basis of the data of the consolidated accounting of costs, which is carried out item by item for accounting objects, redistributions, workshops and the enterprise as a whole with a division of costs according to the norm, changes in norms and deviations from norms.
Accounting for sets of costs is based on accounting for cost elements in the carriers of accounting and economic information (primary documents, computer media). The construction of accounting for sets of costs depends on the specific characteristics of a particular enterprise, primarily on the nature of the technology and organization of production, the number of business units, and their intra-production organizational structure. In addition, accounting for the movement of raw materials and materials in production (semi-finished products of its own production), the presence and types of auxiliary industries, and a number of other factors have an impact. Together, all these factors determine the number of directions and levels of the vaults.
Consolidated accounting of production costs in normative accounting is usually carried out in special sheets opened for a certain type or group of similar products. In addition, itemized costs are shown in a statement with a subdivision of costs based on current rates, rate changes and deviations.
At manufacturing enterprises that maintain regulatory accounting, it is envisaged that deviations from the norms and changes in the norms are distributed between the commodity output and the remnants of work in progress. For this, the indices of deviations from the norms and changes in the norms are determined to the standard amount of the balances of work in progress at the beginning of the month and the costs for the month for each item. With stable balances of work in progress, deviations from the norms are recommended to be written off to the cost of commodity output. Periodically (once every five days, ten days), by workshops and sections (teams), summaries (reports) should be drawn up on deviations in the consumption of raw materials, materials, semi-finished products, wages. They indicate the reasons and culprits (initiators) of deviations.
At enterprises, by order of the head, addressees are established to whom reports (summaries, reports) are sent for consideration and management decisions (development of measures or taking administrative measures, etc.) and determining the timing of submission of information on deviations at various levels of management.
In the accounting calculation of the cost of production, material costs must be deciphered. To do this, in addition to the statement of summary accounting of production costs by calculation items, a similar statement of material costs is compiled. In it, in addition to the monetary value, for each costing group, the quantity of materials is shown in the appropriate units of measure.
The data on both statements represent the actual cost of goods produced, broken down into the appropriate terms. Unlike other methods, in normative accounting, the actual cost of production is determined as the algebraic sum of costs at the rate (C n), deviations from the standards (O n) and changes in standards (I n) according to the following formula:
C f \u003d C n ± O n ± I n
1. 3. Similarities and differences between the accounting system "Standard-Costing" and
domestic regulatory accounting of production
Accounting systems "Standard-costing" and the standard cost accounting method have much in common, but they also have their own characteristics.
Both accounting systems imply strict rationing of all costs. Based on the established norms (standards) for the consumption of resources for individual cost items, standard estimates are drawn up, and these estimates are drawn up before the beginning of the reporting period.
For the effective functioning of both accounting systems, it is necessary to keep separate accounting and to exercise strict control over costs. The differentiation of the costs incurred within the limits of the norms and by deviations from them must be organized according to the places of their occurrence and in the context of responsibility centers.
The regulatory accounting system, like the Standard Costing accounting system, requires systematic generalization and analysis of the deviations that arise. This is done for operational intervention, and not only at the end of the year, in order to eliminate negative phenomena in the production process and manage costs, and take measures to prevent them in the future. Many believe that negative phenomena only mean the excess of actual costs over the established norms. However, this is not always the case. Norms do not arise out of nowhere, they are scientifically developed and have a solid foundation. For example, the consumption rates of raw materials and materials in the manufacture of products meet all the requirements of the technological process, and deviation (both upward and downward) from the norms is impossible without violating the production technology. If, in the process of manufacturing products, a violation of technology is allowed, then this inevitably entails a decrease in the quality of the finished product. Thus, the savings in actual costs, compared to standard costs, are only at first glance a favorable fact. It must be remembered here that the norms, and, consequently, deviations from them, can be set for various elements of costs, different - only quantitative, only price (sum), and can also be quantitative-sum.
As noted, both systems are similar, but not identical. Let's list the main differences.
In contrast to the domestic system of regulatory accounting, the accounting system "Standard Costing" does not provide for separate accounting of changes in the norms themselves in current accounting. Many standards in the conditions of the "Standard Costing" accounting system are applied for months and even years without changes. Only significant changes, such as a change in the design of a product, an improvement in production technology, a change in economic conditions, a significant increase or decrease in the cost of materials, labor force, cause the need to revise the standards.
When applying the normative accounting method, indicators of changes in norms are involved in the calculation.
An important difference is that when using the "Standard Costing" accounting system, standard costs are written off directly to production accounts. The deviations arising in each reporting period between actual and estimated costs during the year are accumulated on separate accounts of deviations and are fully written off not to production costs, but directly to the financial results of the enterprise.
The normative accounting method assumes costs within the limits, as well as write off deviations from the norms to the accounts of accounting for production costs. Recall that deviations in the cost of purchased materials are preliminarily reflected on account 16 "Deviation in the cost of material assets". The differences accumulated on this account in the cost of purchased inventories, at the actual cost of purchase (procurement) and discount prices, are written off to the accounts for accounting for production costs.
The actual production cost of products released from production is reflected in the debit of account 40 "Release of products (works, services)". The standard (planned) cost of products manufactured, work handed over and services rendered is reflected in the credit of account 40 "Output of products (works, services)".
The deviation of the actual production cost of the manufactured products, the works handed over and the services rendered from the standard (planned) cost price is determined on account 40 "Output of products (works, services)" by comparing its debit and credit turnovers. Deviations identified in this way are debited in the future to account 90 "Sales".
Thus, under the normative method of accounting for costs, the amounts within the limits of the norms and the amount of deviations from the norms are collected on the same accounts.
The domestic regulatory accounting system is focused on production and is not focused on the sales process, which makes it difficult to develop and justify sales prices for products.
Table 1
The main differences between the regulatory accounting method and the system
"Standard costing"
| Comparison area | "Standard costing" | Normative method |
| Accounting for changes in norms | No current accounting of changes in norms is kept | Conducted in the context of reasons and initiators |
| Accounting for deviations from the norms of direct costs | Deviations are documented and attributed to the culprit and financial results | |
| Accounting for deviations from the norms of indirect costs | Indirect costs are attributed to the cost price within the limits, deviations are identified taking into account the volume of production and are attributed to the results of financial activities | Indirect costs are charged to cost in the amount of actual costs incurred, deviations are charged to production costs |
| The degree of regulation | Unregulated, does not have a unified methodology for setting standards and maintaining accounting registers | Regulated, general and industry standards and norms developed |
| Accounting options | Costs, production output and work-in-progress are recorded at standard cost. Production costs are accounted for according to actual costs, product output - according to normative, the remainder of work in progress - according to standards, taking into account deviations | Work-in-progress and production output are assessed according to the norms at the beginning of the year, deviations from the norms are highlighted in the current accounting. Work-in-progress and production output is estimated according to the norms at the beginning of the year, deviations from the plan are revealed in the current accounting. All costs are accounted for at current rates |
Standard costing - the method of accounting for costs and costing using standard costs.
The term "Standard Costing" in English is standart costing.
Comment
Standard costing is a costing and costing system using target costs. The meaning of standard costing is that products are accounted for during the period not based on actual costs, but on the basis of the established planned cost. This facilitates accounting for the period. At the end of the period, deviations of the standard cost from the actual one are calculated. The resulting differences are reflected in expenses or income.
Example
The enterprise has determined that, on average, the cost per unit of production is 10,000 rubles. During the period, the cost of production is determined in this amount as the standard cost.
At the end of the period, it turned out that the amount of actual costs exceeded the standard by 100,000 rubles. This amount is additionally recognized as an expense.
If the standard cost is significantly different from the actual, then it is recommended to revise the standard cost to bring these indicators closer.
In Russian accounting, the term "Standard Costing" is not defined. At the same time, we come across the term "Normative cost accounting", which is close to Standard costing. Thus, the Regulation on accounting and financial reporting determines:
"Finished products are reflected in the balance sheet at the actual or standard (planned) production cost, including the costs associated with the use in the production process of fixed assets, raw materials, materials, fuel, energy, labor resources, and other costs of production or by direct items costs. " (p. 59)
"The goods shipped, the work handed over and the services rendered, for which the revenue is not recognized, are reflected in the balance sheet at the actual (or standard (planned)) full cost, including, along with the production cost, the costs associated with the sale (sale) of products, works, services reimbursed by the contractual (contract) price. "(p. 61)
The normative method of cost accounting is also provided for by the Chart of Accounts. When accounting for materials at discount prices (planned cost of acquisition (procurement), average purchase prices, etc.), the difference between the cost of values \u200b\u200bat these prices and the actual cost of acquisition (procurement) of values \u200b\u200bis reflected on account 16 "Variation in the cost of materials". Account 40 "Release of products (works, services)" is intended to summarize information on products manufactured, works handed over to customers and services rendered for the reporting period, as well as to identify deviations in the actual production cost of these products, works, services from the standard (planned) cost.
Similar rules in IFRS. Thus, paragraph 21 of the International Financial Reporting Standard (IAS) 2 "Inventories" indicates: For convenience, such methods of estimating the cost of inventories as the method of accounting at standard costs or the method of accounting at retail prices can be used if the results of their application approximate the value of the cost price. Standard costs take into account normal levels of consumption of raw materials and supplies, labor, efficiency and productivity. They are regularly reviewed and, if necessary, revised in the light of current conditions.
