Standard Cost
Accounting glossary · Understand, connect, apply
A standard cost is a planned cost for a specified unit of input, output or activity under defined operating assumptions. It provides a benchmark for budgeting, costing and variance analysis.
Example
One unit is expected to use 3 kilograms of material at 4 per kilogram and 2 labour hours at 15 per hour. The direct material and labour standard totals 42 before overhead.
Remember the difference
A standard is not necessarily a current forecast or an ideal minimum. State the efficiency level and price assumptions, and review standards when operating conditions change.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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