Hey everybody! I'm currently going through the basics of cost accounting and I have a doubt. Are Predetermined and standard costs different in any way or the same? I'm giving you both the definitions for easy reference,
Predetermined Costs:
It is the cost which is computed in advance, before the production starts, on the basis of specification of all the factors affecting the cost.
Standard Costs:
Estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions (where special or extraordinary factors, that may affect performance, are absent). Standard costs are used as target-costs (or basis for comparison with the actual costs), and are developed from historical data analysis or from time and motion studies. They almost always vary from actual costs, because every situation has its share of unpredictable factors.
Thank you soo much! :)
CAclubindia
