Difference Between Standard Costing and Budgetary Control

Written by True Tamplin, BSc, CEPF®

Updated on July 22, 2022

How to Differentiate Between Standard Costing and Budgetary Control

Standard costing and budgetary control are both helpful techniques to improve the efficiency of employees, control production costs, and establish responsibility structures within corporations.

The main differences between standard costing and budgetary control are summarized and discussed in this article.

1. Scope

Standard costing is used only for those aspects which are related to production and its associated costs. However, budgetary control is not limited to production.

In budgetary control, various budgets are prepared and analyzed that are not related to production (e.g., the cash budget).

2. Data Used

The data used in standard costing are the estimated costs related to different elements of cost. These are data collected and processed based on technical and expert advice.

By contrast, the data used in budgetary control are generally from the immediate past, in which proper adjustments are made keeping in mind possible future changes expected during the budget period.

3. Period

Standards are not fixed for a certain period; instead, they are used relatively for a long time. Standards do not change regularly. They are revised only when major changes have occurred in production processes, technology, or other areas.

Dissimilarly, budgets are prepared for a specific period (e.g., monthly, quarterly, half-yearly, or yearly).

4. Proposed Action

Standard cost determines the target of activities, while budgets disclose the possible maximum limits of the activities.

5. Coverage

In standard costing, standard costs and actual costs are compared, variances are calculated and analyzed, while in budgetary control such exercises are not done.

6. Partial Use

Budgetary control may be exercised partially for a few activities. It is not always necessary to prepare budgets for all the activities. However, standard costing is not used partially.

7. Dependent

Budgetary control is possible even when standard costing is not followed. By contrast, when standard costing is adopted, budgetary control must be exercised. Thus, budgetary control becomes the basis for standard costing, which is not a basis of budgetary control.

8. Application

Standard costing is suitable only for industries in which production processes are relatively uniform and standardized. Budgetary control can be used even in industries where production is not repetitive or standardized.

Difference Between Standard Costing and Budgetary Control FAQs

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, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.