average costing vs standard costing
Hi Mike, Standard Cost is the most simple costing method compared to Moving Average and FIFO - simple in term of COGS calculation of Finished Goods. But beyond the simplicity, there is a big demand to come up with a standard cost that is as close as possible to the actual cost and to minimize the variance.
What is the 'Average-Cost Method'. The average-cost method is a costing method by which the value of a pool of assets or expenses is assumed to be equal to the average cost of the assets or expenses in the pool. BREAKING DOWN 'Average-Cost Method'.
Standard Costing (Explanation) Introduction to Standard Costing. Standard costing is an important subtopic of cost accounting. Standard costs are usually associated with a manufacturing company's costs of direct material, direct labor, and manufacturing overhead.
Average cost method. Under the 'Average Cost Method', it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale.