What is the Difference Between Idle Cost and Standard Cost?
🆚 Go to Comparative Table 🆚The main difference between idle cost and standard cost lies in their definitions and purposes:
Idle Cost:
- Refers to the benefit forgone due to disruptions and stoppages in the production process.
- Occurrence of idle cost results in an adverse variance since idling resources bring no economic benefits.
- Idle cost variances are not calculated separately; however, their effects are captured in variances that calculate efficiency (e.g., labor idle time variance).
Standard Cost:
- Refers to a predetermined cost or an estimated cost for a unit of a resource.
- Standard cost variances may be favorable (standard cost exceeds actual cost) or adverse (actual cost exceeds standard cost).
- Variances are calculated for standard cost comparing it with actual costs.
In summary, idle cost is associated with the opportunity cost of resources being idle due to disruptions and stoppages, while standard cost is a predetermined or estimated cost for a unit of a resource. The variances for idle cost are not calculated separately, as their effects are captured in efficiency-related variances. In contrast, standard cost variances are calculated against actual costs to compare the difference between the predetermined cost and the actual cost.
Comparative Table: Idle Cost vs Standard Cost
Here is a table comparing the differences between idle cost and standard cost:
| Aspect | Idle Cost | Standard Cost |
|---|---|---|
| Definition | Idle cost refers to the benefit forgone due to disruptions and stoppages in the | Standard cost is a predetermined cost or an estimated cost for a unit of a resource. |
| Purpose | No economic benefits or drawbacks | Economic benefits or drawbacks may result from variances between standard costs and actual costs |
| Variance | Not calculated separately; effects captured in variances that determine efficiency (e.g., Labor idle time variance) | Variances are calculated by comparing standard costs with actual costs |
| Result | No effect on cost management | Helps in cost management by identifying and addressing variances |
Idle cost is the opportunity cost (advantage missed from the next best option) resulting from disruptions and stoppages in the production process. On the other hand, standard cost is a predetermined or estimated cost for a unit of a resource, and it helps in cost management by identifying and addressing variances between expected and actual costs.
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