Standard Costing and Target Costing.

Running head: STANDARD COSTING AND TARGET COSTING
STANDARD COSTING AND TARGET COSTING
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STANDARD COSTING AND TARGET COSTING1
Abstract
This paper mainly focuses on the significance of costing system in a modern organization.
The study is mainly focused on two articles based on standard costing and target costing.
From the paper, it has been found that standard costing is useful in controlling process where
target costing mainly focuses on planning and approach process.

STANDARD COSTING AND TARGET COSTING2
Table of Contents
Introduction................................................................................................................................3
Features of Standard Costing.....................................................................................................3
Significance of standard costing................................................................................................5
Standard Costing and Target costing; Comparisons..................................................................6
Significance of target costing.....................................................................................................8
Recommendation......................................................................................................................10

STANDARD COSTING AND TARGET COSTING3
Introduction
The report will focus on standard costing and Target costing based on two articles
from different sources. The study will help with understanding the purpose and usefulness of
management accounting in an organisation. The necessary costing method for the
organisation will also be discussed from that report. The usefulness features of standard
costing and Target costing will be also observed. The study will also check whether Standard
costing or Target costing is necessary or not in an organisation relating to recent journal
articles. The comparison and contrast factor of Standard and Target costing will be also
discussed. The definition and features of standard costing as well as Target costing will be
mentioned in the body of the report. The example will be also given of the two articles related
to the discussions of each. The relevancy of the costing systems in uncertain business
environment will be also observed as well as the competitive environment of the business
will be viewed on the basis of the article. Lastly, from the articles, the recommendations and
findings from the report will be discussed and the use of the certain control system will be
discussed.
Features of Standard Costing
The practice of substituting the expected cost for the actual cost can be called as standard
costing in accounting. This process mainly estimates the cost of production of a company.
The creation of standard cost for all activities within an organisation in involved by this
process. Standard cost focuses to reduce the time to calculate actual costs (Cooper, 2017). By
this process it will be easier to calculate the standard cost for an organisation. The accountant
may calculate the differences caused by standard costing such as labour rate changes or
change in cost of material (Triyuwono, Chandra and Asri, 2018). The changes in standard
cost can be done by the accountant to match them with actual cost (Steyn, 2017). This
process follows LIFO and FIFO method which can help maintain stock calculation and
valuation of inventory in large organisation (Mishra, 2018).
It is important to understand the advantages and drawbacks of standard costing in order to
understand standard costing. The advantages of standard costing can be as follows
 It is impossible to budget without standard costing because the actual cost of a item
cannot be calculated without Standard cost before finalising the budget.