Standard costs are generally based on:

Question

Quizplus · Accepted Answer

Standard costs are generally based on the estimated average production costs for the period. This involves estimating the costs of raw materials, labor, and overhead that are expected to be incurred during the period in order to produce a unit of output. By setting these estimates as standard costs, the company can use them as a baseline for evaluating actual costs and performance. Option A is incorrect because standard costs are not meant to reflect desired production costs, but rather the costs that are expected to be incurred based on realistic estimates. Option B is incorrect because actual production costs cannot be used as the basis for setting standard costs, as this would defeat the purpose of using standards in the first place. Option C is also incorrect, as the sales price does not necessarily reflect the costs of production and is therefore not relevant for setting standard costs.

Standard Costs Are Generally Based On