Actual Cost - What is meant by standard cost?

Q: What is meant by standard cost?

Standard costs are estimates of the actual costs in a company's production process, because actual costs cannot be known in advance. This helps a business to plan a budget.

Answer

Since real production costs can't be anticipated in advance, businesses utilize standard costs as approximations. For a company, this means better budget planning.

Actual Cost - What is meant by standard cost?

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