standard costing

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A system of cost ascertainment and control in which predetermined standard costs and income for products and operations are set and periodically compared with actual costs incurred and income generated in order to establish any variances. Standard costing systems are very expensive to develop and maintain; they were also designed for traditional manufacturing systems in which direct labour and direct materials are the most important costs. Recent years have seen a decline in the use of such systems as companies become less labour intensive.

Subjects: Financial Institutions and Services — Accounting.

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