Basic principles of traditional cost method

Standard cost method, also known as standard cost accounting, is an important part of western management accounting. It refers to a product cost calculation method based on the pre-established standard cost, comparing the standard cost with the actual cost, accounting and analyzing the cost difference, and it is also a cost control system to strengthen cost control and evaluate economic benefits. Its core is to record and reflect the formation process and result of product cost according to standard cost, so as to control the cost.

Target cost is an estimated cost, which refers to the cost of products, services, engineering projects, etc. , is in the production and business activities, according to the predetermined goals formulated in advance. This combination of estimated cost and target management method is called target cost. Generally speaking, target cost refers to unit cost, which generally includes planned cost, norm cost, standard cost and estimated cost, while standard cost is a relatively scientific target cost.

The main contents of standard cost method include: the formulation of standard cost, the calculation and analysis of cost difference and the accounting treatment of cost difference. Among them, the formulation of standard cost is the premise and key to adopt standard cost method, which can achieve the purpose of cost control in advance; The calculation and analysis of cost difference is the focus of standard cost method, which can promote the realization of cost control objectives and evaluate economic benefits accordingly.