Standard Cost

[STAN-durd kost]

What is the definition of Standard Cost?

Realistic estimated costs for direct materials, direct labor, and factory overhead that are predetermined before the actual production or operation occurs.

Using Standard Cost in an Example

In a manufacturing company, the standard cost for producing a unit of product might include $30 for materials, $20 for labor, and $10 for overhead. These costs are calculated based on historical data and expected future conditions to help the company set budgets and performance benchmarks.

Using Standard Cost in a sentence

The finance team reviewed the standard costs and noticed a discrepancy in the overhead allocation, prompting a reevaluation to ensure accurate product costing.

Related Terms

Surviving Spouse

A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.

Learn More

Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.

Learn More