Overview of Standard Costing
Under standard costing, predetermined costs are used for valuing inventory and for charging material, resource, overhead, period close, and job close and schedule complete transactions. Differences between standard costs and actual costs are recorded as variances.
Standard costing is supported under both Inventory and Manufacturing Costing. See: Inventory and Manufacturing Costing Compared.
Use standard costing for performance measurement and cost control. Manufacturing industries typically use standard costing. Standard costing enables you to:
- establish and maintain standard costs
- define cost elements for product costing
- value inventory and work in process balances
- perform extensive cost simulations using unlimited cost types
- determine profit margin using expected product costs
- update standard costs from any cost type
- revalue on-hand inventories, intransit inventory, and discrete work in process jobs when updating costs
- record variances against expected product costs
- measure your organization's performance based on predefined product costs
If you use Inventory without Work in Process, you can define your item costs once for each item (in the cost master organization) and share those costs with other organizations. If you share standard costs across multiple organizations, all reports, inquiries, and processes use those costs. You are not required to enter duplicate costs.
The cost master organization can be a manufacturing organization that uses Work in Process or Bills of Material. No organization sharing costs with the cost master organization can use Bills of Material.
See Also
Overview of Cost Management
