ERP Term
"Actual Cost"

Every labor or material transaction is valued at the cost you pay to your vendor or employee as opposed to valuing the transaction at a standard cost.

"Actual cost" is the cost you incur when you purchase materials or labor from a vendor or employee. This cost is typically higher than the standard cost, which is the cost that would be incurred if you were to purchase the same materials or labor from a different source. The actual cost can also be used to refer to the actual price paid for a good or service, as opposed to the market price.

The actual cost is important to consider when making business decisions because it can impact your bottom line. For example, if you are considering purchasing a new piece of equipment, you will want to compare the actual cost of the equipment with the standard cost. If the actual cost is significantly higher than the standard cost, you may want to reconsider your purchase.

In some cases, the actual cost may be lower than the standard cost. This can happen if you can negotiate a better price with your vendor or if you find a more efficient way to produce the same product. Either way, it is important to consider the actual cost when making business decisions.

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