Which of the following statements is true of standard cost?
A)It is equal to the actual cost of one unit of product.
B)It is the amount management thinks that one unit of product should cost.
C)It allows companies to generate more favorable than unfavorable variances.
D)It is often calculated after production for the period is complete.

Question

Quizplus · Accepted Answer

Standard cost is the amount that management thinks one unit of product should cost. It is a predetermined cost that is used to compare to the actual cost, allowing companies to analyze their performance and generate variances. It is calculated before production begins and is used as a benchmark to evaluate production costs. Therefore, option B is the correct answer.

Which of the Following Statements Is True of Standard Cost