What is standard costing
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Standard cost accounting is a form of budget cost accounting in which all service payments are always offset at standardized rates. Withdrawals from stock are always valued at the standard purchase price and services from cost centers are always valued at the planned cost rate. This has the great advantage that in the target / actual comparison, deviations that have arisen in upstream systems do not affect downstream systems. This corresponds to the requirement of the accountability calculation, namely to show only those costs that can also be influenced. The standard product costs come from the plan or preliminary calculation. In cost planning, they are obtained for each product by multiplying the material requirements (default quantity) with the corresponding standard material prices as well as the working hours (default times) with the associated proportional plan cost rates. They say what the individual product should cause in terms of performance-related costs. In the preliminary costing, the standard product costs are order-specific, i. H. calculated according to the exact customer specifications, but with standard prices and planned cost rates. The resulting difference is therefore only due to the order-related changes.
from: IGC Controller Dictionary, International Group of Controlling (Ed.)
There are standard costs for serial production. The product must be standardized or standardized; d. H. recurrently produced according to a certain parts list or recipe as well as according to a certain work plan and specified times. In the case of the standard costing, the entire quantity structure for material (recipes for mixtures as well as yields and waste rates) as well as the time structure (selected production process, planned lot size, work plan of the piece) is standardized. The counterpart to standard cost accounting or standard costing is the pre- and post-calculation for individual production. The quantity and time structure of the order are not standardized here because they depend on the specification of the customer's request in each individual case. In the case of order-based post-costing, the cost rates per hour can also be used as a plan approach as the performance unit of a cost center. The number of hours, on the other hand, cannot be standardized. What a job does can usually also be standardized for individual production, but not how much of it it has to provide for an individual order.
Examples of a standard calculation - special cases
A company provides Packaging films here - in contract production for various customers in the consumer goods industry. The foils follow certain specifications in terms of width, thickness, type of material, type of further processing, color and imprint. In the case of such an order production, the controller received the project from his management to introduce standard cost accounting and to determine standard costs for the products. However, this task is generally not solvable in this case. The calculation of standard costs assumes that the products are standardized. This means, at least in part, a waiver to fulfill every special request of a customer. The starting point of the standard cost calculation is that the sales department is able to say no once in a while and not comply with every special request. If this is excluded by the nature of the program, a prerequisite for an invoice with standard costs would be that in the area of preliminary products or semi-finished products can be standardized according to the modular principle. Even in the case of individual production, at least assemblies or Components serial production and therefore calculate at standard costs. If, due to the nature of the matter, this is also prohibited in the example described, because, for example, the widths and thicknesses to be observed later on when rolling foils, a standard calculation for products is generally not possible. Here each order has to be produced from the beginning and the costs have to be recalculated from the first process onwards, based on the order. It can then be said that a rolling mill or a printing press recurrently provides the same performance. But what it rolls and what width has to be adhered to or what type of imprint should be chosen, can be standardize only to the extent that the customer recurs the product type in question retrieves - so standardize only in Segment of one.
The problem is similar in the case of a Yarn spinningthat meets customer requirements both in terms of batch size and color specification. In the case of a wool yarn spinning mill, if the flake has to be dyed, then yarn strands cannot be mass-produced as undyed intermediate products as standard, but must be produced from start to finish according to the customer's color requirements. The product is again only defined together with the customer.
In practice one finds mixed types between standard product or standard cost calculation and individual production. So becomes a Machine factory draw their constructions as far as possible so that components can be manufactured in series. Or in the case of one Furniture manufacturer For example, individual kitchen combinations can be put together from standardized components. Or in the case of a company that is about Metal contacts manufactures for certain customers and thus operates contract production, it is anyway serial products if the customer repeatedly places orders and with the same punching tool and according to the same work plan and the same standard times, the product can be manufactured again. In this case, too, a standard calculation can be made, although it is not about products for the open market that are sold from stock, for example, but also again Customer standard products.
Standard costs and contribution margin calculation
A contribution margin calculation can be implemented more easily wherever the option of standard costing is available. In such a case, one can proceed much more statistically and get rid of the closed nature of a billing cycle. A typical case of standard production and standard costing would be the manufacture of chocolate, which is recurrently produced according to specified recipes and certain parts lists for the equipment as well as according to a specified work plan and standard occupancy times. The company produces the goods in stock and the sales department sells the goods from the finished store. In this case, the contribution margin calculation can be implemented simply by adding a Standard calculation of products at product costs is set up and that the resulting standards are included in the article master record for (electronic) invoicing - analogously in the data of the scanner cash registers. The computer can then call up the product cost rate in the master record for a specific item number for each invoice line and thus calculate the product cost of sales on the basis of standards.
Consequence: The contribution margin statistics up to contribution margin I are just as quick and can be sorted multiple times according to articles, customers or areas as the sales statistics. In addition, it is not mandatory in such a case that the standard product costs are available all at once. It would be sufficient to first determine the standard product costs for the most important products in accordance with the ABC principle and to show the contribution margins there first.
In the case of an order-oriented recalculation, however, the billing must be closed. For example, hours are first entered in the payroll, sorted according to the employee's master number. The hour records are then used in the billing of the performing cost centers and convey both the performance reference value as actual hours and the wage costs incurred for cost type accounting. Only in the third step does it then go over the hours, evaluated with the cost rate of the performing cost center, in the order invoice - to the cost units. A closed cycle of the invoice is assumed here, which also means that a contribution margin calculation based on the recalculated product costs can only be available later than a contribution margin calculation based on standardized product cost rates.
Change standard costs?
Standard means something like reference value. If you constantly change standards in the sense of updating, you practically no longer have any standards. This corresponds to the fundamental topic of changing timetables within the validity of the timetable period. This timetable budget, to which the standards correspond per piece or per hour, should not be changed during the business plan period of usually one year. One speaks then of frozen standards. Based on the deviations, the expectation calculation is drawn up alongside the planning. This rolls. The expectation calculation based on the impressions of the first quarter is corrected by the expectation based on the results of the first half of the year. The timetable for comparison, however, remains the same.
If you want to change standard costs during the year, you have to linked to the calculation of expectations be. One then also speaks of current standards; formed roughly from the average of three rolling months. Standards for the calculation of product costs are to be changed if other parts lists or work plans or decisions on the type of purchase (make or buy) apply.
Standard costs and cost of sales method
Standard costs can also be calculated at full costs. The periodic structural costs, e.g. of the production area, must then be included. This requires an assumption for planned employment. The manufacturing costs of the services provided to achieve the sales revenue are the full manufacturing costsungcost. And performanceen Written in the plural (§ 275 Paragraph 3 HGB) means that the invoiced products are to be valued with these full cost rates from the calculation. This also applies to US GAAP (including the manufacturing overhead cost).
Here, too, the rule can be applied that standards are adapted when the product manufacturing processes (parts lists and work plans) change. Normal deviations from the target / actual comparisons, e.g. B. the cost centers can be inserted under the items other operating income (favorable) or other operating expenses (unfavorable). In this case of the full cost standards, the deviations from the cost centers consist of consumption and employment deviations.
IGC controller dictionary, International Group of Controlling (Ed.), 4th edition, Schäffer-Poeschel, Stuttgart, 2010
Controller Handbook, 6th edition rewritten, Verlag für ControllingWissen AG, Offenburg, 2008
Albrecht Deyhle, Controller Academy
Gerhard Radinger, Controller Academy
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