What is a standard cost card?
A standard cost card contains an itemization of the standard amounts of materials, labor, and overhead required to create one unit of a product. The card also multiplies the standard cost of each of these line items to arrive at the total standard cost of a product. The card has two purposes:
- To derive the standard cost of a product
- To serve as the basis for variance analysis when actual costs for the product are compiled
The number of units and their standard costs that are listed on the card should be reviewed and possibly revised regularly, due to all of the following factors. Otherwise, the standard cost card will gradually diverge from the actual results experienced when manufacturing a product.
- The standard cost card is comprised of the expected quantities of materials to be used during the production process, which can vary somewhat from the actual amounts used. For example, it may contain a certain amount of scrap that may be higher or lower than the actual amount experienced. Also, the amount of spoilage encountered during the setup of a production run may also vary from the standard amount listed in the standard cost card.
- The standard costs listed on the card may also vary from actual results. For example, there may be an expectation to
purchase a component for $1.00, but because it was actually purchased in a smaller unit quantity than anticipated when the standard was created, the supplier charges a higher price per unit.
- The standard amount of labor stated on the card may be incorrect, because of changes in worker efficiency, altered equipment configurations, changes in the mix of experience levels used in a production team, and so forth.
- Similarly, the standard cost of the labor stated on the card may be incorrect, because of changes in the wages paid to employees, or in the amount of overtime paid, or in the mix of employees used in the manufacturing process.
- The standard amount of overhead allocated to the product may also vary from actual results, since it is based on a combination of an expected pool of overhead costs and an expected volume of production to be generated during the period. If either estimate varies from actual results, then there will be a difference between the standard overhead cost and the actual overhead cost.
A physical card is rarely used to store standard costs. Instead, this information is stored in the computer system and printed as needed.
Example of a Standard Cost Card
The following is a simplified version of the layout of a standard cost card. An actual card would itemize the individual components in the product.