Standard costing is a managerial control technique that facilitates a comparison of standard cost and revenue with actual results to obtain variance that is used to stimulate improved performance. On the other hand, Budgetary control is the process whereby managers set financial and performance goals by preparation budgets and then compare the budgeted performance with actual results and adjust performance as it is needed.
The following are the difference between budgetary control and standard costing:
- Budgetary control can be operated without standards whereas standard costing can not exist without a budget.
- Budgetary control is prepared to cover various functions of the business such as purchases, sales, production and so forth. In other words, it has a macro approach. On the other hand, standard costing is prepared in respect of cost unit.
- Budgetary control can be implemented in all industries whereas standard costing is only possible in certain industries.
- The objective of budgetary control is to enable formulation of policy, coordination of activities and delegation of authority whereas the objective of standard costing is to enable management in making decisions, in fixing prices and valuation of closing stock.
- Budgetary control is more management-oriented whereas standard costing is more engineering-oriented.
- Budgetary control is more extensive as it covers all the operations of the business whereas standard costing is more extensive than the technique of controlling cost.
- Budgetary control is a projection of financial accounts whereas standard costing is the projection of cost accounts.
- Budgetary control can be implemented even in parts that are to cover one or more of the area of business whereby standard costing covers all items of expenses without leaving any item. So it can not be operated in parts.
- Budgetary control does not involve any accounting after computing variances whereas variances are accounted for under standard costing.