IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 3. Give a comparative account of standard costing and budgeting.

Ans. 

	Standard costing	Budgeting
1	Standard costing is based on technical information and is fixed scientifically.	It is based on standard cost, historical costs and estimates.
2	Standard costs are used mainly for the manufacturing function and also for marketing and administration functions. Therefore, it does not require functional coordination.	Budgets are prepared for different functional departments such as sales, purchase, production, finance, personnel department. Therefore, it requires functional coordination.
3	Standard costs emphasises the cost levels which should be reduced	Budgets emphasises cost levels which should not be exceeded.
4	In standard costing variances are usually revealed through accounts.	In Budgeting, variances are not revealed through accounts and control in exercised by putting budgeted figures and actuals side by side.
5	In standard costing, a detailed analysis is needed in case of variances.	No further analysis is required if costs are within the budget.
6	Standard costing sets realistic yardsticks and therefore, it is more useful for controlling and reducing costs.	Budgets generally set maximum limits of expenditure without considering the effectiveness of expenditure.
7	Standard cost is revised only when there is a change in the basic assumptions and basis.	Budgeting is done before the beginning of each accounting period.
8	Budgeting is done before the beginning of each accounting period.	Budgets are set on the basis of present level of efficiency.