All 38 Variance Analysis questions
More in Variance Analysis
What is variance analysis? What is the difference between a favorable and an adverse variance? What is a standard hour and how is it used in efficiency measurement? What is the total cost variance and how does it relate to the sub-variances? What is a standard costing system? What does an adverse sales price variance indicate? What is a favorable variance a warning sign of sometimes? What is the difference between a budget and a standard? What are the two components of the direct materials variance? What are the two components of the direct labor variance?
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Budgeting & Forecasting › Variance Analysis

What is a standard cost?

Beginner

Answer

A standard cost is a predetermined, carefully estimated cost per unit for materials, labor, and overheads under efficient operating conditions. Standards are the benchmark against which actual costs are compared in variance analysis, and they underpin standard costing and budget preparation.
Real-world example The standard cost of a product is set at 2 kg of material at $3 and 0.5 hours of labor at $12.

Common follow-ups: What are standards used for? | Who sets them?

Variance Analysis Types of Budgets Variance Analysis
All 38 Variance Analysis questions