actual cost

Definition

A cost accounting method in which budgets are established using data from previous accounting cycles or periods. This method can help companies avoid budgeting errors due to incorrect cost estimation. However, it may also result in cost overruns if costs vary drastically from previous accounting periods, resulting in problems for the company.

Use actual cost in a sentence

We were deciding on how to base our future projections and we decided to use actual cost based on history.

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You should try to break things down to figure out how the actual cost will affect your new products marketability.

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They determined the best way to budget for future month's was to use an actual cost approach as it was based on past data.

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