Standard Costing Example: A Cost Card and Its Variances

Standard costing sets what one unit should cost, a standard quantity of each input at a standard price, written on a standard cost card, and then compares each real batch against it. The gap, the variance, splits in two: a price variance, from paying more or less than the standard price, and a usage variance, from using more or less than the standard quantity for what you made. The split is the useful part, because the fixes are different: a price variance is a buying problem, a usage variance a kitchen problem. In the example below, a preserves maker's standard is $2.93 a jar; a batch of 200 jars cost $3.24 a jar, $62.10 over standard, of which $24.50 was the price of cherries and $37.60 was using more cherries, jars and hours than the card allows. Below is the cost card, the batch, each variance, what to do about them, and a free template.

The short version

• Standard cost a unit = standard quantity × standard price, for every input.
• Standard quantity for a batch = standard quantity a unit × units actually made.
• Price variance = (actual price − standard price) × actual quantity.
• Usage variance = (actual quantity − standard quantity for the batch) × standard price.
• Positive costs more than standard; negative, less.
• Price variances go to whoever buys; usage variances to whoever makes.
• TaroStack costs every batch at what it used and shows recipe truth from your own batches. More below.

The standard cost card

Old Mission Preserves, a made-up preserves maker in Traverse City, Michigan, I use in these examples, sets the standard for a 9-ounce jar of tart cherry preserves:

The standard quantities come from the recipe and from what good batches used, cook-down included; the standard prices from this year's quotes. How to build the recipe cost behind a card like this is in steps in recipe costing.

A batch against the standard

The September batch made 200 jars:

The batch cost $647.50 against a standard of $585.40, $62.10 more, or $3.24 a jar against $2.93.

Reading the variances

Cherries, price: $24.50. Late-season cherries cost $2.45 a pound against a standard of $2.20, on the 98 pounds used. That's a buying question: contract earlier in the season, buy frozen at the low point, or raise the standard and the price of the jar if $2.45 is the new normal. A supplier price tracking template shows whether it's a blip or a trend.

Cherries, usage: $17.60. The batch used 98 pounds where 200 jars should take 90, 8 pounds more at the standard price. Riper fruit cooks down further, a longer boil loses more, and fruit left in the pot is used but not jarred. That's a kitchen question; how a batch's yield is measured is in batch yield formula.

Jars, usage: $3.40. Four jars failed to seal and were thrown out. A few a batch is normal; a dozen points to the lids or the rims.

Labor, usage: $16.60. The batch took 7.5 hours against a standard of 6.67, 50 minutes more, perhaps from the extra cook-down, perhaps from a new helper. Labor is priced at the standard rate here, so it shows only as usage.

Variances only mean something against a standard that's right. If every batch shows the same usage variance, the standard is wrong, not the kitchen; fix the card. How a restaurant does the same comparison for its whole menu is in food cost variance formula.

Get the template

Download the standard costing template. Two sheets: the standard cost card, with each input's standard quantity and price for one unit; and a batch, with the units made and each input's actual quantity and price. It works out the standard quantity for the batch, the standard and actual cost, the price and usage variances for each input, the totals, and the cost a unit against standard. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

Twelve preserves, four batches a week, cherries from two orchards at prices that change every delivery, and jars by the pallet. A sheet needs each batch's actual quantities and prices typed in by hand, and nobody does that for every batch in September.

How TaroStack does it

TaroStack costs every batch at what it used and shows recipe truth from your own batches.

Batches at actual cost. Each preserve is a recipe with versions, the standard of what a batch should use, and units convert: cherries bought by the 30-pound case, used by the pound. Recording a batch takes the cherries, sugar, jars and labels off stock from the lots used, at what you paid, and divides by the jars that came out, so every batch has its actual cost without retyping, shown against the recipe's standard cost.

Recipe truth. Your own batch history shows whether a recipe yields what it claims, so a usage variance that's in every batch shows up as a recipe to fix.

And the prices. A price-creep report per supplier shows whose prices are rising, so a price variance that's here to stay is visible before it's a surprise.

Recipes, batches, lots and margins by product and customer are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

What is an example of standard costing?

A preserves maker sets a standard of $2.93 a jar: 0.45 pounds of cherries at $2.20, sugar, pectin, a jar, a label and 2 minutes of labor. A batch of 200 jars that cost $3.24 a jar shows $62.10 of variances to explain.

What is a standard cost card?

A list of every input to one unit, with its standard quantity, standard price and standard cost, adding up to the standard cost of the unit.

How do you calculate price variance and usage variance?

Price variance = (actual price − standard price) × actual quantity. Usage variance = (actual quantity − standard quantity for what was made) × standard price. Together they equal actual cost minus standard cost.

What's the difference between standard cost and actual cost?

Standard cost is what a unit should cost at standard quantities and prices; actual cost is what a batch used at what was paid. The difference is the variance.