STANDARD COSTS

First, gather information about the material aquisition itself. This includes the sum of freight, purchase (less discounts) and handling charges including taxes, duties, etc.,

Then, gather information about what costs have been added due to input from labor that is directly attributed to the material. This includes hourly wages, payroll taxes and fringe benefits.

Next you are ready to estimate an applicable overhead rate. You do this after considering both variable and fixed costs. Divide these costs by the estimated output of production to get a per unit amount of overhead.

Adding these costs together, gives you a standard cost on a per-unit-basis.

Total standard costs are calculated by  multiplying this number by the estimated production.