5 uses of standard costs

5 uses of standard costs

Standard cost is the predetermined cost calculated in relation to a prescribed set of working conditions, correlating technical specifications and scientific measurement of materials and labor to the process and wage rates expected to apply during the period to which the standard cost is intended to relate, with an addition of an appropriate share of budgeted overhead.

Standard costs are used for

  • Promoting and measuring efficiency.
  • Simplifying costing procedures.
  • Fixing selling prices.
  • Controlling and reducing cost.
  • Valuing inventories

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