Standard Cost

Calculating Standard Cost means detailing the costs associated with Direct Materials, Direct Labor, and Factory Overhead.

Direct Materials comes from the Bill of Materials (BOM) and identifies the list of components and quantities needed to produce the item.

Direct Labor is calculated from the Routings information that defines the crews needed to support the machines used to produce the item.

Factory Overhead uses the calculated rates and allocated spending to assign costs as the item moves through departments.

Most costing processes require calculating, comparing and maintaining more than one type of standard cost.