standard cost

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Fig. 78 Standard cost. Table showing the standard cost of an upholstered chair.

standard cost

an estimated product cost, prepared in advance of production, that shows what a product ought to cost given reasonably efficient working. Standard cost includes the direct materials cost of the product, direct labour cost and production overheads, as well as distribution, selling and administration overheads. Overheads are charged to products using an appropriate COST RATE derived by dividing budgeted overheads by budgeted output. Fig. 78 shows a simplified standard cost for a product. Such predetermined standard costs are used to provide a basis for price fixing and for cost control through VARIANCE ANALYSIS. See also DIRECT-LABOUR COST VARIANCE, DIRECT-MATERIALS COST VARIANCE, OVERHEAD-COST VARIANCE.
References in periodicals archive ?
Historically, production controls have come from standard costing systems.
The problem structure in the standard costing format in this paper similarly allows students to better model the real-world whereby a business chooses to use standard costing procedures, sets the standards and then measures the variances with actual results for the business.
In this article, we present a research protocol for determining how mature lean manufacturers' use of standard costing compares to lean accounting theory.
The standard costing method says it now costs $24 per widget.
Standard costing and variance analysis are generally believed to have been one, if not the single, most important innovation arising from the work of Frederick W.
The resulting correlation coefficient indicates no relationship between the production environment and the use of standard costing.
The ultimate goal of Alberta Health is to develop a prospective, case-based funding system, using standard costing methodologies across the province.
This month, we will wrap up our exploration of this subject with a look at standard costing.
the purpose of standard costing is to practice management by exception; i.

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