What’s the value of standard costing and its role as a control mechanism?
No manufacturing company of producer wants to sell its product for less than it costs to make. However the calculation for this cost is complicated and when there are a number of products being made inside the same organisation, it is necessary to apply the same methods for finding the total cost for each. This is by standard costing where the cost is calculated by the same method, (but different numbers). Its value is that it provides management with a comparison of what it takes to produce each kind of product. When the market will not accept one of these costs, the costing tells the management when it should cease production of this kind of goods. Thus it can be used as a control of business activity.
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