Standard costing

Using expected costs to plan and to spot when reality differs.

What it means

Standard costing sets an expected cost per unit for materials, labour and overhead, and compares actual costs against it.

Why it matters

It makes variances visible: whether a job cost more because materials were dearer, because it took longer, or because more was used.

What it looks like in practice

Review the standards periodically. Standards set two years ago in a period of cost inflation produce variances that are noise rather than signal.

What to watch out for

Standards used as targets for people rather than as a measurement tool, which encourages the numbers to be managed.

Where to get proper advice

Your accountant, who can produce most of these from data they already hold.