A change for your life / standard costs

Human beings always try to estimate and standardize our life, letting us guide what they propose the excellence of it, also that our ideas become a worthy project of our thoughts with a precise return for our interests.

Now, if at every moment attitudes are assumed for personal benefit without imagining that each activity we carry out we link them with the empirical and scientific and we simply assume that it is one more activity, for example when you are a university student or father of a family you are stipulated some expenses necessary for our subsistence such as the cost of food, but if we change the name of expenses for costs we would understand that this payment of money is necessary for the excellence of human life, or perhaps if we feed ourselves we can also exist. Of course the answer to that question is very clear if you do not have food, there are no nutrients for our body which causes death.

You will ask where I want to take you with all this, easy to an implementation of the accounting sciences in your life, because, if we get the knowledge that every outlay made in our day to day is a cost, we understand that a specific time you will receive the reward for it.
Let's start defining what is a cost and the difference that this has of an expense. The cost is that disbursement of money that will be recovered after the production of a good or service; the expense is the disbursement of cash that can not be recovered. That is to say, if we raise it in our day to day, what at a moment we consider as an expense is actually a cost, since, in spite of not recovering with the sale of a good, if we recover our money for the services and activities that we carry out since these will generate an income for each human being. Because, it is preferable to consider that the feeding, the payment of the studies are a cost that an expense, because this motivates us to wish the best.
However, if we verify any text that talks about costs, it will always be taken to the companies, but why not implement that in our lives. For example, if every time we want to have a standard of the best, we will do everything possible and impossible for our goal to be fulfilled and thereafter be gain for us. Allow me to exemplify each of the concepts that I will present below.

Now we do enter in matter, the standard cost is a tool of utility used to evaluate the performances and in turn helps to control a specific budget, that is, when we implement the theories of the standard we will be in a constant evaluation to establish parameters that we they will indicate the moment in which we must improve to obtain greater benefit without an exaggerated use of resources. As well as, The use of standards also helps to budget the utility and cash flow because it allows to anticipate the needs of future resources. For example, if as civil engineering construction students we present a series of demands that lead us to the creation of models, which require materials that exceed the weekly budget, what would we do? Would you risk altering your budget or not meet the requirements? The answers to these questions require an evaluation of your standard cost.

When there are these small situations that lead to an alteration of what you want, it is called variations which will allow you to evaluate your activities and correct what is necessary, we must also understand the existence of desired, ideal and achievable standards. Let's continue ... in the previous example there will be a variation that involves what is stipulated for educational materials that should be evaluated by the following.

Let's suppose that for the realization of the model we have a stipulated cost of 8.07 Bs each (each), while the real price of each material is 9 bs c / u and the actual amount we need to buy is 160,000 leaves (x product). We have the following formula that will allow us to recognize in reality what our variation would be

Material Price Variation (V.M.) = (Actual Unit Price - Standard Unit Price) x Actual Quantity Purchased
We substitute our formula V.M = (9 bs / H - 6 bs / H) x 160 H = 480 bs
With this information we can immediately determine that for the total amount purchased we have a negative alteration difference, which we must consider in the execution of future budgets and in this way evaluate if the ideal purchase of our materials will benefit the execution of the model or simply been an unnecessary variation. This type of verification should be carried out in each one of the costs generated in life, since through it we can recognize if we are adapted only to the purchase in materials in the same place or that said acquisition has been unfavorable, because the quality of them decreases and more was needed.
For example, if at the time the standard budget was executed, it was averaged that the number of "allowed" sheets for the execution of 3 projects would be 130, but that actually 160 were purchased, we can verify what happened for this variation, through of efficiency.

Taking the above, we will use the formula of efficiency in materials.

Efficiency variation (V.F) = (actual quantity used - allowed quantity) x standard unit price

We have that, V.F = (160 sheets - 130 sheets) x 6 Bs. = 180 bs

This indicates that for each project carried out, a negative variation was obtained, due to the fact that a greater quantity of materials was implemented at a price not considered, in addition that said materials did not possess the necessary quality.

Now, if in our day to day accounting sciences specifically the standard cost were applied, we would not find in a constant evaluation of that money "invested", because, with a standard it should be a measure of the resources attached to the reality , so that its scope is feasible. That is, if we have higher budgets than we really need, we will always be aware of those unnecessary money disbursements, when the reality of applying this issue is the use of less resources and greater benefit, which leads to a life full of efficiency .

All this, will allow us a conscious saving of each activity and the use of each resource taking into account the economy of each country.

---

Bibliographical reference consulted.

 Cost accounting. A tool for business administration. University Teaching Collection.

University Teacher@keniacarolina Degree in Public Accounting.

Image source: