Standard Costing
Definition
A method that assigns predetermined standard costs to products and then analyses the variances between standard and actual costs. It is widely used in manufacturing for control and pricing.
Related Terms in Purchasing & Inventory
Bill of Materials (BOM)
A structured list of the raw materials, components and quantities needed to make a finished product. It drives manufacturing cost, inventory planning and procurement.
Cycle Count
A method of checking inventory accuracy by counting a subset of items on a rolling schedule rather than halting operations for a full stocktake. It keeps records accurate with less disruption.
Goods in Transit
Inventory that has left the supplier but not yet reached the buyer. Which party records it depends on the shipping terms, which decide when ownership and risk pass.
Consignment Inventory
Stock held by one party but still owned by another until it is sold. The holder records a sale only when the goods are sold on; the owner keeps the inventory on their books until then.
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