How to Calculate Standard Unit Cost

Written by carter mcbride
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How to Calculate Standard Unit Cost
Standard unit cost is part of cost and managerial accounting. (business accounts image by Nicemonkey from Fotolia.com)

Standard unit cost is a cost and managerial accounting concept. It is used for determining variance accounting. The standard unit cost is the amount a company should pay for each uni, and it is the company's estimated amount. During the year, unit prices tend to fluctuate, and the company will either pay more or less than they should have paid. The standard cost is compared to the actual costs to determine variances.

Skill level:
Easy

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Instructions

  1. 1

    Determine how much of the unit you think you will need within a given time period. For example, Firm A estimates they will need 100,000 widgets for this month. This is the standard unit.

  2. 2

    Determine the standard price you expect to pay per unit. For example, Firm A looks over previous periods' accounts and sees that it usually pays about £1.90 per widget. This is the standard cost

  3. 3

    Multiply the standard units by the standard cost to determine standard unit cost. In our example, 100,000 times £1.90 equals £195,000.

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