Standard Costing is often described as estimated future cost because it is set before undertaking any project. The idea is to plan the total cost of materials, labours and overheads and estimating the sales as well. At the end of the period, when the project gets completed, actual costs are analysed and compared with the standard costs. Any difference is called the variance and it may be favourable and adverse. It depends on the situation under consideration.
The objectives of Standard Costing are as follows:
The deviation of standard cost from the actual cost is referred to as Variance. Thre are various types of variances calculated in standard costing which are as follows: