Standard costing is a methodology to estimate the standard cost of the process involved rather than using actual cost for costing. Standard costing system is a substitute to cost system like LIFO and FIFO where a large historical cost have to be maintained.
The variances are periodically reviewed by the account department to factor the changes in cost and is reviewed periodically.
Advantages of Standard Cost Accounting System
• Budgeting
A budget consist of standard cost, since it is difficult to incorporate the actual cost of the items on real time basis. Additionally, since a key utilization of budget is to contrast it with real results in ensuing periods, the standard cost utilized are reflected in the budget period
• Inventory Costing
It is to a great degree simple to print a report demonstrating the periodend stock balances, multiply it by the standard expense of each item to generate end inventory value. The outcome does not precisely coordinate the real cost of stock, but rather it is close. On the other hand, it might be important to overhaul standard expenses as often as possible, if real expenses are constantly evolving. It is most straightforward to redesign costs for the most elevated dollar parts of stock on a regular premise.
• Price formulation
A firm that manages custom items, then it utilizes standard expenses to accumulate the standard cost of a client's prerequisites, after which it includes an edge. This may be a significant complex framework, where the business division utilizes a database of part expenses that change contingent on the unit amount that the client needs to arrange. This framework might likewise represent changes in the organization's creation costs at diverse volume levels, subsequent to this may require the utilization of longer generation runs that are  cost
Disadvantages of Standard Cost Accounting System
• Cost plus Contract
Standard cost accounting cannot be applied in cost plus contract because it is based on actual market price and percentage commission based on it.
• Cost updating due to dynamic environment
A standard costing framework expect that expenses don't change much in the close term, with the goal that you can depend on models for various months or even a year, prior to redesigning the expenses. Be that as it may, in a situation where product life are short or nonstop change is driving down expenses, a standard expense may get to be obsolete inside of a month or two.
• Unitlevel information
The change that commonly go with a standard costing report are gathered in total for an organization's whole creation division, as can't give data about inconsistencies at a lower level, for example, the individual work cell, bunch, or unit,
Standard cost variances formulas
FORMULAS USED IN STANDARD COSTING 

Material cost variance 
Standard material cost  actual material cost 
Material price variance 
(standard price  actual price) x actual quantity purchased or used 
Material usage variance 
(standard quantity for actual output  actual quantity) x standard price 
Material mix variance 
(actual mix  standard mix ) x standard price 
Material yield variance 
(standard yield  actual yield) x standard cost 
Labor cost variance 
Standard wage cost  actual wage cost 
Labor rate variance 
(standard rate  actual rate ) x actual hours 
Labor efficiency variance 
(standard hours for actual output  actual hours worked) x standard rate 
Idle time variance 
Idle time x standard rate 
Variable production cost variance 
Standard variable overhead  actual variable overhead 
Variable overhead expenditure variance 
(standard overhead rate  actual overhead rate) x actual hours 
Fixed overhead cost variance 
Overhead absorbed  overhead incurred 
Fixed overhead expenditure variance 
(budgeted fixed overhead  actual fixed overhead) 
Fixed overhead volume variance 
(budgeted volumeactual volume) x standard absorption rate 
Fixed overhead capacity variance 
(budgeted hoursactual hours) x standard absorption rate 
Fixed overhead productivity variance 
(standard hours for actual outputactual hours worked) x standard absorption rate 
Sales value variance 
(budgeted quantity x standard selling price)  (actual quantity x actual selling price) 
Sales price variance 
(standard selling priceactual selling price) x actual quantity sold 
Sales volume variance 
(budgeted quantityactual quantity) x standard selling price or standard profit or standard contribution 
Sales margin variance 
(budgeted quantity x standard profit) (actual quantity x actual profit) 
Sales contribution variance 
(budgeted quantity x standard contribution)(actual quantity x actual contribution) 
Sales allowance variance 
(budgeted allowanceactual allowance) x actual quantity sold 
Sales mix variance 
(standard mixactual mix) x standard selling price or standard profit or standard contribution 
Sales quantity variance 
(budgeted quantityactual quantity in standard mix) x standard price or standard profit or standard contribution 
Hence, this concludes the definition of Standard Cost Accounting System along with its overview.
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