The normal or specified cost used as the basis for measurement against an actual. Standard costs for manufactured items include labor, material and overhead, and vendor acquisition, freight, duty fees and other categories for purchased items.
The predetermined cost of performing an operation or producing a product when labor, materials, and equipment are utilized efficiently under reasonable and normal conditions. Normal conditions exist when there is an absence of special or extraordinary factors affecting the quality or quantity of the work performed, or the time or method of performing it.
A predetermined calculation of how many costs should be under specified working conditions. It is built up from an assessment of the value of cost elements and correlates technical specifications and the quantification of materials, labor and other costs to the prices and/or wages expected to apply during the period in which the standard cost is intended to be used. Its main purposes are to provide bases for control through variance accounting, for the valuation of work in progress and for fixing selling prices.
The planned unit cost of the products, components or services produced in a period. The standard cost may be determined on a number of bases. The main uses of standard costs are in performance measurement, control, stock valuation and in the establishment of selling prices.