Difference between Budgetary Control and Standard Costing

Difference between Budgetary Control and Standard Costing

Standard Costing is a cost accounting system, in which performance is measured by comparing the actual and standard costs. Although budgetary control and standard costing both are based on some common principles; both are pre-determined, comparison will be made with the actual costs and both system need a revision of the standards or the budget, these two systems have certain differences which are as follows:

Budgetary Control

Budgetary Control is the system in which budgets are prepared and continuous comparisons are made between the actual and budgeted figures to achieve the desired result.

  • Budgets are based on past performance adjusted to the anticipated changes in the future. It is a written plan covering projected activities of a firm for a definite time period. It is a financial measure of target and achieve¬≠ment.
  • Budgetary control deals with the operation of a department or the business as a whole in terms of revenue and expenditure.
  • Budgetary control covers as a whole in terms of revenue and expenditures such as purchases, sales, production, finance etc.
  • Budgetary control is applicable to utmost all business organizations.
  • Budgetary control is concerned with a specific period and is based on the totals of amounts.
  • Budgetary control is not based on standard costing system.

 

Standard Costing

The costing method in which evaluation of performance and activity is done by making a comparison between actual and standard costs, is Standard Costing.

  • Standard costs are scientifically predeter¬≠mined in respect of materials, labour, overheads. It is based on engineering and technical data. Standard costs are fixed for each unit i.e., standard hour, standard unit, standard labour mix, standard material mix etc.
  • Standard costing is a system of costing which makes a comparison between standard costs of each product or service with its actual cost.
  • Standard costing is related to a product and its cost only.
  • Standard costing is applicable to manufacturing concerns producing standard products and services.
  • Standard costing is concerned with the standard costs, which are worked out generally per unit of production.
  • Standard costing cannot exist in the absence of a budgetary control system.

 

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