Manufacturing environments involve maintaining standard costs for purchased items and manufactured items. Different approaches can be used to maintain standard costs, and guidelines can be proposed for some of the approaches. The guidelines for maintaining the items' standard costs include several scenarios, such as initially setting standard costs, updating standard costs throughout the frozen period, periodically updating standard costs, and analyzing variances related to standard costs.
The guidelines assume the completion of preparation steps for purchased components and manufactured items. Additional preparation steps are required for manufacturers that use routing information and manufacturing overhead calculations. The guidelines also assume an understanding about cost calculations for manufactured items.