The Benefits of Standard Costs

The standard cost system giving guidelines to the management of some costs are supposed to carry out certain activities so as to enable them to do cost containment by way of improvement of methods of production, labor and election other activities. System usage rates standard provides benefits to the company:

• The planning and preparation of the budget
• Decision-making about the selling price of the product, product development strategies and more.
• Cost control
• Assess the results of the implementation
• Increase awareness of the importance of cost savings
• Implement A Management by Objective (MBO)
• Distinguish the costs that have been incurred to finished production, supplies the product in the process etc.
• Pressing the administration fee
• The report presents the cost quickly

Understanding The Cost of a Standard

Here's some of the sense of the standard fee according to some sources:

1. Standard fee is a fee that is determined in advance, which is the amount of the costs that should be incurred to one unit of a product or to finance specific activities, under the assumption of economic conditions, efficient and certain other factors.


2. The standard fee is the cost of which has been determined in advance and if the irregularities against him, then standard fee is considered true.


3. Cost system is equal to the actual cost of the system except added approximate variants. The standard fee is usually different from the costs actually incurred and estimated variant is the shelter for these differences.

From the definition above it can be concluded that the standard cost is a cost that should be issued to make one unit of product by considering economic conditions, efficiency and certain other factors.