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How to determine standard costs, explained by our business accountants in Sydney

Our business accountants in Sydney define standard costing as the budget for a single unit of good or service. A standard cost is developed for direct materials, direct labour and manufacturing overheads. It is usually split up into two components which are standard quantity and standard price, in which they tell our small business accountants in Zetland the budgeted quantity and budgeted price for each unit of production.

Determining standard costs
Our small business accountants in Sydney determine standard costs using historical data and task analysis. Historical data can be used to forecast future quantities and prices, however, any change in product design or manufacturing will impact quantities and prices.

Task analysis examines the production process in detail, determining what it should cost to produce a product, not what it cost in the previous year. Task analysis also takes into account normal operating conditions, which is a more practical view for employees and managers than an ideal standard. In our business accounting in Sydney, we recommend a combination of task and historical analysis as this is the best approach for determining standard costs.

For more information regarding standard costs, please contact our business accountants in Sydney today.