Standard Costs

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Standard Cost

A standard cost is a predetermined estimated unit cost of a product or service.

Therefore, a standard cost represents a target cost.

Standard costing has a variety of uses

  • It is useful for planning, control and motivation.

  • It is used to value inventories and cost production for cost accounting purposes.

  • It acts as a control device by establishing standards (planned costs), highlighting activities that are not conforming to plan and thus alerting management to areas which may be out of control and in need of corrective action.

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