Standard costing
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IGC-DEFINITION
Standard costing
Standard costing is a cost accounting method where all input and output units are always calculated at standardised rates. Supplies from stock are valued at the standard purchase price and outputs from cost centers at the planned cost rate. This has the great advantage that in the comparison between budgeted and actual figures variances, which have occurred in upstream systems do not appear in downstream systems. In this way the requirement of responsibility accounting is met, whereby only those costs are shown that can be influenced.
The standard product costs derive from preliminary costing. On a unit basis, they are calculated by multiplying the materials required (standard quantity) with the corresponding standard material prices as well as the working hours (standard hours) with the appropriate proportional cost rates. They therefore express what the single product will incur in the way of output-related costs. In the preliminary calculation the standard product costs are calculated in terms of a specific order, i.e. according to exact specifications from the customer but with standard prices and budgeted cost rates. So any difference that may arise is to be attributed only to subsequent changes in the order.
from: IGC-Controller-Wörterbuch, International Group of Controlling (Hrsg.)
