Standard Costing Still Matters in 2025; But Here’s What Matters More

In a world of automation, real-time data, and AI-driven analytics, it’s easy to assume that traditional methods like standard costing are outdated. But in 2025, standard cost still plays a critical role in manufacturing accounting and not just because it’s familiar.

It’s because it provides structure, predictability, and a baseline for performance.

Why Standard Cost Still Has a Place

Standard costing assigns expected costs to materials, labor, and overhead. It’s widely used because it:

• Simplifies budgeting and variance analysis
• Supports ERP integration and reporting
• Helps set pricing and measure performance

In high-volume, repetitive manufacturing environments, standard cost is still efficient and effective.

When to Use Activity-Based Costing (ABC)

ABC assigns costs based on actual activities and resource consumption. It’s more accurate in complex, low-volume, or custom production environments where overhead is significant and not easily traced.

Use ABC when:

• Overhead is a large portion of total cost
• Products vary widely in complexity
• You need granular insights into cost drivers

The Real Key: Understanding the Method

Whether you use standard cost or ABC, what matters most is understanding how the method works and what it’s telling you.

• Are your cost drivers accurate?
• Are your variances meaningful?
• Are your decisions aligned with your costing model?

Choosing a method is important. But knowing how to interpret and apply it is what drives better decisions.

Final Thought

In 2025, the best manufacturers aren’t just choosing between standard cost and ABC they’re building teams that understand both. Because the real power isn’t in the method. It’s in the mindset.