ECONOMICS

Detailed explanation-1: -The word standard means a benchmark or yardstick. The standard cost is a predetermined cost which determines in advance what each product or service should cost under given circumstances.

Detailed explanation-2: -A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be” cost. Standard costs are often an integral part of a manufacturer’s annual profit plan and operating budgets.

Detailed explanation-3: -Standard cost is used to identify the variances between the actual cost incurred and the cost that should have occurred to produce the goods in normal conditions. Standard cost is a predetermined cost.

Detailed explanation-4: -Standard costs are based on historical data and expected levels of efficiency. They can be considered the “ideal” cost of producing something and provide a target for managers to strive for. On the other hand, budgets are actual costs that have been incurred.

Detailed explanation-5: -Definition: A standard cost is an estimated expense that normally occurs during the production of a product or performance of a service. In other words, this is theoretically the amount of money a company will have to spend to produce a product or perform a service under normal conditions.