# What are Normal Costs?

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Normal costs are approximations of production costs that are calculated using actual material costs, actual labor costs and estimated overhead. The estimate of overhead is typically based on historical averages or predetermined rates. If the estimate of overhead later turns out to be inaccurate, this can be handled as a variance. Normal costs are used to estimate the cost of goods sold and value of inventory.
 Overview: Normal Costs Type Business Cost Definition Approximations of production costs based on actual variable costs and estimated overhead. Related Concepts
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This is the complete list of articles we have written about business costs.
Abatement
Applied Cost
Capacity Cost
Capex
Capital Improvement
Carrying Costs
Closing Costs
COGS
Cost Of Capital
Cost Of Revenue
Cost Of Living
Direct Cost
Distress Cost
Expenses
CAC
Fixed Costs
Friction Cost
Employee Costs
Holding Costs
Intangible Cost
Marginal Cost
Operating Cost
Operating Expenses
Opex
Legacy Costs
Outlay Cost
Relevant Cost
Shrinkage
Normal Costs
Sunk Costs
Tangible Cost
Operational Costs
Travel Expenses
Unit Cost
Opportunity Cost
Variable Costs
Prospective Cost
Semi Variable Cost
Step Costs
Switching Costs
Transaction Costs

A list of common types of business cost.

## Matching Principle

A principle of financial accounting.

A list of common types of business cost.

## Cost Escalation

A definition of cost escalation with an example.

## Cost Reduction Examples

Common examples of cost reduction.

## Cost Estimates

The common types of cost estimate.

## Relevant Cost

A definition of relevant cost with examples.

## Cost Structure

Detailed examples of how to map out the cost structure of a business.

## Cost Competition

The definition of cost competition with examples.

## Cost Goals

An overview of cost goals with examples.

A list of common business risks.

## Risk Treatment

The five things that can be done about risk.

## Risk Mitigation

A list of techniques for reducing risk.

## Positive Risk

The potential that you'll achieve too much of a good thing.

Any risk that people have a strong aversion too.

## Risk vs Opportunity

The surprising similarities between risk and opportunity.

## Risk Management vs Contingency Planning

The difference between risk management and contingency planning.

## Uncertainty

The common types of uncertainty in decision making and strategy.

## Inventory Risk

The common types of inventory risk.