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Average vs Standard Costing: Key Differences
1. Source: https://docs.oracle.com/cd/A60725_05/html/comnls/us/cst/stdavg.htm
Average Costing Standard Costing
Material with Inventory; all cost elements
with Bills of Material
Material and material overhead with Inventory; all
cost elements with Bills of Material
Item costs held by cost element Item costs held by cost sub-element
Unlimited sub-elements Unlimited sub-elements
No shared costs; average cost is maintained
separately in each organization
Can share costs across organizations when not using
Work in Process
Maintains the average unit cost with each
transaction
Moving average cost is not maintained
Separate valuation accounts for each cost
element
Separate valuation accounts for each subinventory
and cost element
No variances for Work in Process
Transactions
Variances for Work in Process transactions
Table 1 - 2. Comparison of Standard and Average Costing