Standard Costing vs. Budgetary Control

Read this article to learn about the major differences between standard costing and budgetary control.

Standard Costing vs. Budgetary Control: Major Differences

Difference # Standard Costing:

1. Standard costing is a system of accounting where predeter­mined costs are used for analysis of variances and control of the entire organization.

2. Standard costs are scientifically predeter­mined 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.

3. Standard may be expressed both in quantita­tive and monetary measures.

4. Standard costing is concerned with ascertainment and control of costs.

5. Any variance-adverse or favourable, is investigated.

6. Standard costing emphasis is on what should be the cost.

7. Standard costing is determined for each element of cost.

8. Standard costing is related with the control of costs and it is more intensive in scope.

9. Standard costing is introduced primarily to ascertain the efficiency and effectiveness of cost perfor­mance.

10. Standards are usually limited to manufactur­ing activities only.

11. Standard cost is a projection of cost accounts.

12. Standard costs are used in tactical decisions like, price fixation, computation of product cost, valuation of inventory etc.

Difference # Budgetary Control:

1. Budgetary control is a planning exercise made by the manage­ment in setting budgets for the forthcoming period and analysis of actual with the budgeted figures and corrective action is ini­tiated if any deviations are identified.

2. 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 achieve­ment.

3. Budgets are mainly expressed in monetary terms.

4. Budgetary control  is concerned with the overall profitability and financial position of the concern.

5. Budgetary control puts emphasis more on excess over the budget.

6. Budgetary control emphasis is on the level of costs not to be exceeded.

7. Budgetary control is determined for a specified period.

8. Budgetary control is concerned with the operation of business as a whole and it is more extensive.

9. Budgetary control is introduced to state in figures as approved plan of action relating to a particu­lar period.

10. Budgets are set for all departments in an organisation.

11. Budget is a projection of financial accounts.

12. Budgetary control emphasis on policy determination, achieve­ment of goals, co-ordination of different departments and activities, delegation of authority and responsibility.