Which statement is true regarding a standard cost system?
A)Both actual and standard costs are used.
B)Only standard costs are used.
C)If variances occur,then something negative in the operations has occurred.
D)Standards are used only when actual amounts are not available.

Question

Quizplus · Accepted Answer

A standard cost system uses both actual and standard costs to compare and analyze performance. Variances can occur due to various reasons like changes in market conditions, unforeseen events, inefficiencies, etc. These variances can be either positive or negative and need to be analyzed to identify the root cause and take corrective actions. Standards are predefined benchmarks against which actual performance is measured, and they are used even when actual amounts are available.

Which Statement Is True Regarding a Standard Cost System