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Management Accounting · Standard costing system

How to Prepare a Standard Cost Card

Updated 11 October 2026 · Fact-checked

A standard cost card lists the expected quantity and price of every input needed for one unit of output. Multiply quantity by price for each line, add direct materials, direct labour, variable overhead and fixed overhead to get the standard cost, then add profit to find the standard selling price.

Understand Standard Cost Card

A standard cost is a planned, expected cost for one unit of product or service. A standard cost card is the one-page record of it. It shows, for each input, how much you expect to use and what you expect to pay.

The card exists because variances depend on it. Later you compare actual results with the card. Without a standard quantity and a standard price, you cannot say whether a cost was good or bad.

The card is built line by line. Direct materials: standard quantity × standard price per unit of material. Direct labour: standard hours × standard rate per hour. Variable overhead: standard hours × variable overhead rate per hour. Fixed overhead: standard hours × fixed overhead absorption rate per hour, if the card uses absorption costing.

Add these lines to get the total standard cost per unit. Then add the profit mark-up or margin to get the standard selling price. Some questions give a selling price and ask for the standard profit per unit instead.

Standard quantities should include normal, expected losses (such as normal waste). They should not include abnormal waste. A standard set with normal waste allowed is called an attainable standard.

Key formulas to remember

Direct material cost per unit
Standard quantity of material × standard price per kg (or per unit)
Use the quantity needed per finished unit, including normal waste. Do this for each material.
Direct labour cost per unit
Standard hours per unit × standard rate per hour
Do this for each grade of labour. Standard hours include allowance for normal idle time if the question says so.
Overhead cost per unit
Standard hours per unit × overhead absorption rate per hour
Rate = budgeted overhead ÷ budgeted hours (or units). Keep variable and fixed overhead on separate lines.
Total standard cost per unit
Materials + Labour + Variable overhead + Fixed overhead (absorption costing)
Under marginal costing, leave out fixed overhead. The card then shows standard variable cost.
Standard selling price
Standard cost + standard profit
If profit is a margin on selling price: price = cost ÷ (1 − margin %). If a mark-up on cost: price = cost × (1 + mark-up %).
Normal loss adjustment
Input needed per good unit = good output required ÷ (1 − normal loss %)
The loss % is a percentage of input. If the loss is quoted as a percentage of output, multiply instead: output × (1 + loss %).

How to solve Standard Cost Card questions

Use the same layout for any card question. Work one unit at a time and keep every line separate.

  1. 1Read the question and note whether it asks for absorption or marginal cost, and whether it wants the cost, the price, or the profit.
  2. 2List each input: every material, each labour grade, variable overhead and fixed overhead.
  3. 3Find the standard quantity or hours per unit. Adjust for normal loss if it is given.
  4. 4Write the standard price or rate for each input.
  5. 5Multiply quantity by price for each line to get the cost per unit.
  6. 6Add the lines to get the total standard cost per unit.
  7. 7Add profit as a mark-up on cost or a margin on selling price, as stated, to get the standard selling price.
  8. 8Check the units: all figures are per one unit of output, and the total should be sensible against the numbers given.

Quickest way: Line-by-line table in your head or on scrap paper

When to use it: Use this for any number-entry or multiple-choice question that asks for a total standard cost or selling price per unit.

  1. Write Mat / Lab / VOH / FOH down the page.
  2. Fill in quantity × price on each line and write only the result.
  3. Sum the lines once, then apply the profit step.
  4. Check for traps: loss, marginal versus absorption, and mark-up versus margin.
  5. Scan the options. The wrong ones are often the answers you get by missing one of those traps.

Common mistakes in Standard Cost Card

  • Using the finished output quantity instead of the input quantity when there is normal loss.

    Students read '1 kg per unit' and ignore the loss that happens during production.

    Fix: Work out the input needed per good unit first, then multiply by the price. The cost of normal loss stays in the unit cost.

  • Mixing up mark-up and margin.

    Both are percentages of profit, so they look alike.

    Fix: Mark-up is on cost: price = cost × (1 + %). Margin is on selling price: price = cost ÷ (1 − %). Read the wording carefully.

  • Including fixed overhead in a marginal cost card.

    Students copy the layout of an absorption card without checking the costing method.

    Fix: If the question says marginal costing or variable cost, leave fixed overhead out.

  • Using total budgeted overhead instead of the rate per hour.

    The budget total is the biggest number in the question.

    Fix: Divide by budgeted hours to get the rate, then multiply by the standard hours for one unit.

  • Adding up quantities of different inputs.

    Students add kilograms, hours and units together.

    Fix: Add only money values. Quantities stay inside each line and are never added across lines.

  • Using actual prices or hours instead of standards.

    Questions sometimes give both actual and budget data.

    Fix: A card shows standards only. Ignore actual figures when building it.

Worked examples

Example 1

A product uses 4 kg of material at $5 per kg and 3 labour hours at $8 per hour. Variable overhead is absorbed at $2 per labour hour. Fixed overhead is absorbed at $6 per labour hour. What is the standard total absorption cost per unit?

Show the solution
  1. Materials: 4 × $5 = $20.
  2. Labour: 3 × $8 = $24.
  3. Variable overhead: 3 × $2 = $6.
  4. Fixed overhead: 3 × $6 = $18.
  5. Total: 20 + 24 + 6 + 18 = $68.

Answer: $68 per unit

Example 2

A product needs 9 kg of input material at $4 per kg to make 1 unit of good output, after allowing for normal loss of 10% of input. Each unit needs 2 labour hours at $10 per hour. Variable overhead is $3 per labour hour. There is no fixed overhead in the card. The business wants a profit margin of 20% on selling price. What is the standard selling price per unit?

Show the solution
  1. Materials: 9 kg × $4 = $36. The 9 kg is already the input per good unit, so the normal loss is covered.
  2. Labour: 2 × $10 = $20.
  3. Variable overhead: 2 × $3 = $6.
  4. Standard cost: 36 + 20 + 6 = $62.
  5. A 20% margin on selling price means cost is 80% of price.
  6. Price = 62 ÷ 0.8 = $77.50.

Answer: $77.50 per unit

Exam tips

  • Check the first line of the question for marginal or absorption costing before you add anything up.
  • Decide whether profit is a mark-up on cost or a margin on selling price. Margin questions need a division, not a multiplication.
  • In multiple response questions, check each statement about standards on its own. Typical correct points are that standards are per unit and that normal loss is included.
  • Work to the number of decimal places the answer box asks for. Keep full figures until the final line.
  • If the quantities look odd, check the loss rate. It is often the only hidden step.

Practice questions from Standard costing system

Standard Cost Card in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Standard Cost Card: frequently asked questions

What does a standard cost card show?

It shows the expected quantity and price of each input for one unit: materials, labour, variable overhead and fixed overhead. It adds them to give the standard cost, and often shows the standard selling price and profit.

Does the standard cost card include fixed overheads?

Under absorption costing it does, using a fixed overhead absorption rate per hour or per unit. Under marginal costing it shows only variable costs, so fixed overhead is left out.

How do you allow for normal loss on a standard cost card?

Work out how much input is needed to get one good unit. If the loss is a percentage of input, divide good output by (1 − loss %). Cost all the input at the standard price.

Why do we need a standard cost card?

It gives a fixed benchmark. Actual costs are compared with it to calculate variances. It also supports budgeting, pricing and performance reviews.