Standard Costing And Budgetary Control System In The Manufacturing Firm,. A Case Study Of Flourier Nig

Most businesses use planning and budgeting procedures to prepare for the future. Manufacturing firms need to understand the relationship of sales revenue to product costs, selling expenses and administrative expenses as yearly as possible in product development. Therefore, the practice of standard costing and budgetary control system has been a crucial area of concern for manufacturing firms in Nigeria it is known that in this technological age, that for an organization to make a tremendous progress, there must be standards set in the various operational areas.

 As a consequence, the importance of standard costing and budgetary control system in manufacturing firms cannot be over emphasized budgetary control assist the manufacturing firms to monitor their progress towards the pre-determined aims and objectives.

A standard costing system through its control process ensures an effective and efficient attainment of a company’s goal producing high quality products. It attempts to inform management of the pre-determined cost set before the product is manufactured or service rendered. Asechemie stated that one advantage of standard costing is the speed with which we know the cost of material used, because in standard costing we do not wait but record material etc used as soon as possible.

Standard costing serve management in cost reduction. They provide a means of communication between top management and line supervisors. Standard set goals, which help to develop cost consciousness in the employees. These standards are motivating fore to encourage the operators to improve their performance.

Batty 19975:9 defined standard costing as a system of accounting which is designed to show in detail how much each product should cost to produces and sell when a business is operating at a standard level of efficiency and for a given output. According to the definition given by the chartered institute of management accountants CIMA budgetary control on the other hand is the establishments of budgets relating the responsibilities of executives to the requirements of a policy and the continuous comparism of actual with budgeted results, either to secure by individual action the objective of that policy or to provide a basis for its Revlon.

Standard costing and budgetary control are interrelated because when standard costs have been determined, it is relatively easy to compute budgets for production costs and sells. When actual costs differ from standard costs the resulting differences cost variances provide a basis for control reporting.

Budgetary control is applied to the system management control and accounting in which all budgeted expenditure or income are compared with the actual results. Corruptive action follows immediately in order to arrest the variances.

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