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What is Standard Costing?

Standard costing is a cost accounting method where standard costs are established for direct materials, direct labor, and manufacturing overhead. These standard costs are then compared with the actual costs incurred during production to analyze variances. Standard costing helps businesses set benchmarks for performance evaluation, cost control, and decision-making.

What is Deviation Analysis?

Deviation analysis, also known as variance analysis, involves comparing actual performance with expected or standard performance. In the context of standard costing, deviation analysis focuses on identifying and analyzing differences (variances) between actual costs and standard costs. By understanding these variances, businesses can take corrective actions to improve efficiency and profitability.

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