Which of the following best describes the concept of standard costs?
A)They are the costs that should be incurred per unit of finished goods inventory.
B)They are the costs that are actually incurred per unit of finished goods inventory.
C)They are the costs that were incurred when current Canadian Accounting Standards were applied.
D)Standard costs are acceptable for reporting purposes

Question

Quizplus · Accepted Answer

Standard costs are the predetermined costs that should be incurred for producing a unit of finished goods. These costs are established before production begins and are based on factors such as historical data, realistic estimates, and industry standards. Actual costs may differ from standard costs, but the latter serves as a benchmark for evaluating performance and controlling costs. Option B is incorrect because actual costs refer to the costs that are actually incurred, while standard costs are estimated costs. Option C is irrelevant to the definition of standard costs. Option D is only partly correct because while standard costs are acceptable for reporting purposes, they are primarily used for planning and performance evaluation purposes.

Which of the Following Best Describes the Concept of Standard