A budget is the quantitative expression of a plan of action prepared for the entire organization or for various departments or for various functions involved in the organization.
Standard cost is the predetermined cost calculated in relation to a prescribed set of working conditions, correlating technical specifications and scientific measurement of materials and labor to the process and wage rates expected to apply during the period to which the standard cost is intended to relate, with an addition of an appropriate share of budgeted overhead.
The following are differences between budget and standard cost:
- The standard cost is the unit concept that applies to a particular product, process or operation whereas budgets are concerned with totals that are for the entity as a whole.
- Standard costs are revised only when they are inappropriate for the current operating condition, whereas budgets are revised on a periodic basis generally once per year.
- Standard cost and the resulting variances are part of the double-entry system of accounting whereas budgets are memorandum figures and do not form part of the double-entry system of accounting.