ABSTRACT
In order to make a profit, a company must sell its products at a price which will more than cover the costs of production. Historical cost standards have the great virtue, provided the recording systems for job times, material usage, and manning standards are adequate, of indicating what has been achieved. Expected cost standards are probably the most suitable for the majority of companies, combining as they do the realism of historical costs, with the adjustments which are necessary if forecast cost changes are to be incorporated in the standard. However the standard is set, a standard costing system will provide management with a comparison between actual and standard costs. A simple but effective standard costing system, introduced by an engineering company near Coventry employing 180 people, uses continually up-dated historical cost standards, against which the actual costs are compared. Properly used, standard costing can provide much useful information regarding operating efficiency.
