Abstract
This chapter provides an overview on standard costing and budgetary control. It presents the idea of flexible budgeting and the need to take into account the actual level of output. Links between standard costing and budgetary control are identified. The chapter describes different types of standard available and the mechanisms for arriving at standards for labor, material, and overhead. It discusses variance analysis and gives examples of variance calculations that provide reconciliation between original budget, flexed budget and actual figures. The chapter discusses the alternative and fast-developing approach of activity based budgeting. The exponents of ABB argue that traditional budgeting systems are lacking in a number of respects.
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