Abstract:

The management principles became the basis for the development of standard costing. Standard costs are usually associated with a manufacturing company's costs of direct material, direct labor, and manufacturing overhead. Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, many manufacturers assign the expected or standard cost. This means that a manufacturer's inventories and cost of goods sold will begin with amounts reflecting the standard costs, not the actual costs, of a product. Manufacturers, of course, still have to pay the actual costs. As a result, there are almost always differences between the actual costs and the standard costs, and those differences are known as variances. There is presented the process of budgeting in production automotive company.