---
title: "Standard cost"
description: "What is standard cost? A set cost per item used to value stock, with any gap to the price paid recorded as a variance. See how it works, with an example."
url: https://1flux.ai/glossary/standard-cost
last_updated: 2026-10-10
---

[Procurement and inventory](https://1flux.ai/glossary#procurement-and-inventory)

# Standard cost

What is standard cost, and where does the difference go when you pay more or less?

Glossary Updated 10 October 2026

Definition

Standard cost is a predetermined cost set for each item, used to value stock and cost of sales, with any difference from the actual purchase cost recorded separately as a variance.

## What is standard cost used for?

Standard costing keeps stock values stable and makes buying performance visible. If the standard is EUR 40 and a receipt costs EUR 42, the extra EUR 2 a unit goes to [purchase price variance](https://1flux.ai/glossary/purchase-price-variance) rather than into stock. Standards are usually reviewed once or twice a year.

A receipt above standard

Example

- Received: 500 units at EUR 42

  EUR 21,000

- Added to inventory at the EUR 40 standard

  EUR 20,000

Purchase price variance

EUR 1,000

Standard costing suits businesses with stable, predictable prices; out-of-date standards make variances pile up and stock values misleading.

In 1flux

Standard cost is one of three costing methods per legal entity. Standards are set per item and entity, receipts at a different price post the difference to purchase price variance, and posting stops if a standard is missing. [See inventory costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Related

## Keep exploring

### [Purchase price variance](https://1flux.ai/glossary/purchase-price-variance)

The gap between standard cost and the price actually paid.

### [Weighted average cost](https://1flux.ai/glossary/weighted-average-cost)

A costing method that values all units at their average cost.

### [FIFO](https://1flux.ai/glossary/fifo)

A costing method that uses the oldest purchase costs first.

### [Costing and valuation](https://1flux.ai/products/inventory/costing-and-valuation)

Weighted average, FIFO or standard cost per company, with cost layers you can audit.

Last updated 10 October 2026