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What is an example of standard cost in a bakery?

Standard costs are the expenses that a company incurs to make the product that it sells. For a bakery, examples of standard costs would include flour, eggs, butter, and other ingredients used to produce breads, cookies, and cakes the bakery sells. These are different from operating costs, which include labor costs for the bakers' salaries, energy costs to run the ovens, and advertising costs to promote the bakery to consumers.

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Standard costs are the expenses a company incurs to make the product that it sells. In other words, standard costs are the direct costs involved in the manufacturing process. If the company produces widgets, then widget components are a standard—or direct—cost of production.

The difference between revenue and total standard costs is the gross profit that the company has earned on its product. This is expected to be a positive number if the company is profitable. The...

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