Standard costs, flexible budgeting, and variance analysis--all are vital components of an effective cost accounting system. Standard Costs are predetermined costs that are usually expressed on a per-unit basis; they are target costs, costs that should be attained. One can think of a standard as a budget for a single unit. Standard costs are the building blocks of a flexible budgeting and feedback system (the comparison of actual performance with planned performance).
Since the company's main objective is to maximise profit, a planning and control system is essential. …
