Difference Between Standard Cost And Estimated Cost

Difference Between Standard And Estimated Cost

The main dissimilarities or difference between standard cost and estimates cost can be pointed out as follows:

1. Meaning

Standard Cost: Future costs which are predetermined scientifically on the basis of certain norms and standards.

Estimated Cost: Future costs which are predetermined traditionally on the basis of past data and experience.

2. Basis

Standard Cost: Costs are determined on the basis of specification.

Estimated Cost: Cost are determined on the basis of approximation or expression.

3. Usefulness 

Standard Cost: Useful for those firms which practice or uses standard costing approach

Estimated Cost: Useful for the firms which use historical costing approach. These costs are determined on the basis of previous cost records and data.

4. Purpose

Standard Cost: To measure the operational efficiency of the firm.

Estimated Cost: To identify the expected cost

5. Cost Control

Standard Cost: It helps to control unnecessary costs.

Estimated Cost: Does not help cost control

6. Revise

Standard Cost: It should be revised frequently

Estimated Cost: No revision required

       

Also Read: 

Difference Between Fixed Cost And Variable Cost

7. Nature

Standard Cost: Stable

Estimated Cost: Flexible

8. Helpful For Management

Standard Cost: Very helpful to the management for planning, pricing, controlling, performance evaluation etc.

Estimated Cost: Not helpful

Standard Cost Vs Estimated Cost (Comparison Chart)

Basis For Difference	Standard Cost	Estimated Cost
Introduction	Future costs that are predetermined scientifically	Future costs that are predetermined as per the past data
Basis Of Determination	Specification	Approximation
Useful For	Firms using standard costing approach	Firms using historical costing
Purpose/Objective	To find out operational efficiency	To find out expected costs
Helpful For Cost Control	Yes	No
Revision	Required	Not required
Nature	Stable	Variable
Helpful For Management	Yes	No

I hope this post is helpful to understand the difference between standard cost and estimated cost and to make comparison between them.