Question

What is a standard cost card, and why is it important

Answer 1

Standard cost card -

A standard cost card is a card / document which contains the details of standard quantity of material, labour and overhead at the standard rate / price required for one unit of output. Then the standard cost of each item is multiplied by total number of items to compute total standard cost of Product. The card lists out

(A) All type of materials and labour required.

(B) Standard cost of each type of material and labour.

Importance of standard cost card -

1. For effective valuation of Inventory, so that proper and accurate cost of each inventory can be calculated.

2. To serve the purpose of Variance calculation ( difference between standard and actual costs) so that monitoring of budget could be done in an effective manner.

3. For evaluating management performance.