#### Standard Cost

Standard Cost is a method of using a standardised cost for an item and periodically revaluing your inventory to bring it back closer to its actual cost. This is achieved by assigning a standard cost to an item (which has usually been calculated using historical data) and then using that cost for all transactions instead of the actual cost of purchase.

Usually, depending on your System preferences, whenever goods are purchased for an item that has been assigned a Standard Cost, the difference between the actual purchase cost and the Standard Cost is posted to the Standard cost variance account (materials) through a Standard Cost Revaluation transaction. Stock is always consumed at the Standard Cost. Please see the and sections for more information.

Standard Costing is typically used when your purchase price fluctuates regularly (due to exchange rates or volatile pricing) and you want to assign a fixed cost to use for your sales and production reporting.