Similarities and Differences Between Budgeting And Standard Costing

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 11, 2023


Similarities Between Standard Costing and Budgetary Costing

Basis of Similarities Standard Costing Budgetary Costing
Predetermined
cost
Standard costs are predetermined costs fixed according to estimates. Budgetary costs are also estimated costs.
Advance cost Standard costs are estimated in advance and compared to actual costs. Budgetary costs are also estimated in advance and compared to actual costs.
Both aim at
cost control
Standard costs are designed to control costs and improve efficiency. Budgetary costing also seeks to promote cost control and maximize employee efficiency.
Cost
comparison
Standard costs are designed well in advance and compared to actual costs. These advanced estimated costs are compared to actual costs.
Reporting Standard costs are periodically reported to top management. Budgetary costs are also reported to management periodically.
Corrective
action
Standard costing lays stress on identifying adverse variances and corrective actions are taken. Budgetary control lays stress on identifying adverse variances.
Similarities Between Standard Costing and Budgetary Costing

Differences Between Standard Costing and Budgetary Costing

Basis of Difference Standard Costing Budgetary Costing
Base Standard costs are predetermined or planned costs. Budgetary costs are based on past experience.
Technique Standard costs are based on technical estimates. Budgetary costs are based on historical data and adjusted to the future.
Scope The standards are set for elements of cost. Budgets are prepared for every business activity.
Limited use Standard costs can be used for estimation or forecasting. Budgets are used for men, materials, and money.
Conditions Standard costs are used in ideal conditions or situations. Budgets are made and used in diverse conditions and situations.
Per unit Standard costs can be calculated per unit. Budgetary costs cannot be calculated on a per-unit basis.
Nature Standards are set only for expenditure. Budgets are compiled for both income and expenditure.
Coverage Standard cost is not comprehensive (i.e., it is limited only to cost operations). Budgetary cost coverage is significantly greater than standard cost coverage.
Parts Standard costs cannot be specified in parts. The budget can be in parts (only the cash budget).
Differences Between Standard Costing and Budgetary Costing

Similarities and Differences Between Budgeting And Standard Costing FAQs

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.