A budget usually refers to a department‘s or a company’s projected revenues, costs, or expenses. A standard usually refers to a projected amount per unit of product, per unit of input (such as direct materials, factory overhead), or per unit of output.

For example, a manufacturer will have budgets for its manufacturing or factory overhead departments. Let’s assume that the budgeted manufacturing overhead for the upcoming year is expected to be $1,000,000 in order to produce the expected 100,000 identical units of product. The standard cost of manufacturing overhead per unit of product  is $10 ($1,000,000 divided by 100,000 units). When the products are not identical, the $1,000,000 of manufacturing overhead might be divided by the expected number of machine hours required to manufacture the units of product. Assuming it will take 50,000 machine hours, the standard cost of the manufacturing overhead will be $20 per machine hour ($1,000,000 divided by 50,000 machine hours).

Learn more about Standard Costs.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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