Sage-Tips

What is the difference between standard price and standard cost?

A standard cost is a pre-determined or pre-established cost to make a unit of finished product. Actual cost is the actual cost of direct materials, direct labor, and overhead to make a unit of product. The difference between actual cost and standard cost is called variance.

What is the difference between standard cost and budget?

The Difference between Standard Costs and Budgeted Costs Answer: The term standard cost refers to a specific cost per unit. Budgeted cost refers to costs in total given a certain level of activity. These standard costs can then be used to establish a flexible budget based on a given level of activity.

Which one statement best describes a standard cost?

Standard Costs are established costs by the company based on historical experiences or the costs expected to be incurred for a specific period. It is set by a company as guidance and comparability to actual costs to determine efficiency and effectivity of operating activities.

Which of the following is a purpose of standard costing?

The use of standard costing is useful for MIS, profit planning, inventory control, product pricing, decision making, cost control etc. Both standards and budgets are concerned with setting performance and cost levels for control purposes.

What is meant by standard cost?

Standard costs are estimates of the actual costs in a company’s production process, because actual costs cannot be known in advance. This helps a business to plan a budget.

What is the difference between standard price and standard cost of direct material?

Purchase price variance. This is the difference between the standard and actual cost per unit of the direct materials purchased, multiplied by the standard number of units expected to be used in the production process. This variance is the responsibility of the purchasing department.

What is standard cost example?

For example, if the direct materials price is $10 and the standard quantity is 20 pounds per unit, you would multiply $10 by 20 to get $200. This would be the standard cost for the direct materials only. This would mean the standard cost for the overhead is $50 because $10 multiplied by 5 is $50.

What is meant by standard costs?

What are standard costs?

Standard costs are estimates of the cost of goods sold — that is, the cost required to produce your products. They usually consist of three parts: direct materials, direct labor, and manufacturing overhead.

What type of cost is standard cost?

A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be” cost. Standard costs are often an integral part of a manufacturer’s annual profit plan and operating budgets.

What is standard cost?

Definition: A standard cost is an estimated expense that normally occurs during the production of a product or performance of a service. In other words, this is theoretically the amount of money a company will have to spend to produce a product or perform a service under normal conditions.

What are the advantages of using a standard costing system?

Fast-paced environment. A standard costing system assumes that costs do not change much in the near term, so that you can rely on standards for a number of months or even a year, before updating the costs.

What is a standard-efficiency boiler?

A standard-efficiency boiler means the boiler has an efficiency rating between 80 percent and 84 percent. Usually, standard-efficiency boilers have a heat exchanger made of cast iron, and they vent through the chimney. Sometimes you can find a standard boiler that is either direct-vented or power-vented.

What is the difference between actual costs & standard costs?

Since standard costs are usually slightly different from actual costs, the cost accountant periodically calculates variances that break out differences caused by such factors as labor rate changes and the cost of materials. The cost accountant may periodically change the standard costs to bring them into closer alignment with actual costs.

What is the difference between energy-efficient motors and Standard Motors?

Considerable variation exists between the performance of standard and energy-efficient motors. Improved design, materials, and manufacturing techniques enable energy-efficient motors to accomplish more work per unit of electricity consumed. Energy-efficient motors offer additional benefits.