Standard Costing

Standard Costing lets manufacturers and wholesale distributors identify and correct problems with inventory costing issues by giving information about costing variances and their causes.

With standard costing, you maintain standard costs across cost categories for an item. These standard costs show the expenses you expect to have for items over time. Keeping track of the expected cost lets you compare that amount to the item cost so you can analyze any variances between standard (expected) and actual costs.

Standard costing tells you that a variance happens and helps you understand why costs are different from what was expected. Variances might be caused by changes in how much you pay for the material or by changes in the quantity of material used:

Knowing the cause of the variance helps you to correct costing issues in your manufacturing and procurement processes and take action to improve these areas.

Related Topics

General Notices