Posted in Operations and Supply Chain Terms, Total Reads: 399
Definition: Actual Costs
Actual cost is the expenditure made to acquire the asset. It can also be defined as the amount of materials, labor costs and any directly associated overhead costs that can be charged to a particular project.
Actual cost is different from the standard cost, although both the costs are used to determine the profitability of the given project.
The aim while using the actual cost is to break down the specifics of the costs that are involved in the project and check whether the production process that is involved with the project is working at an optimum efficiency.
Difference between actual cost and standard cost:
While evaluating the expenses related to a particular job or project, it is essential to understand the difference between the actual cost and the standard cost.
In standard cost, a standard value is assumed and is used to track the usage of resources. The tracking is done with the aim to identify the variance between the production and consumption and is done in the form of either hours or number of units consumed. Whereas, the actual costs is only concerned with the cost incurred during the course of the production or completion of project and not just the units produced.