Tell me how will you calculate standard cost?

Question

Accepted Answer

Standard cost is calculated by adding up the direct materials, direct labor, and overhead costs for a product.

Determine the direct materials cost by multiplying the quantity of materials used by the cost per unit of material.
Calculate the direct labor cost by multiplying the number of labor hours by the labor rate per hour.
Compute the overhead cost by adding up all indirect costs, such as rent, utilities, and depreciation, and dividing by the number of units produced.
Add the direct materials, direct labor, and overhead costs to get the total standard cost per unit.
Compare the actual cost of producing a unit to the standard cost to identify any variances.

Popular interview questions of Management Trainee Finance