Standard Cost

Standard cost is a production or operating cost that is carefully determined in advance. Standard cost is the target cost that should be achieved. Standard cost is compared to actual cost in order to measure the performance of a department or costing process. See standard cost system.

Standard cost is a predetermined cost used as a benchmark for materials, labor, and overhead, and variances are analyzed by comparing actual to standard.

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **Standard Cost** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.