Asked Dec 24, 2019

What is a standard cost? Explain? Give an example?


Expert Answer

Step 1

Standard Cost:


Standard cost is the benchmark amount of per unit product, per unit input or per unit output which is used as a basis for comparison with the actual costs.

Step 2
  • Standard costs ate the benchmarks set by the management for the production activity being performed.
  • The actual cost incurred should always be less than the projected or budgeted cost so as to increase the profitability of the firm.
Step 3

The reasons for the use of standard costs are:


  • Standard costs are helpful in reducing the inefficiencies in the actual performance.
  • Standard costs will assist in ascertaining the variances and to locate the persons responsible for unfavorable variances.
  • Standard costs are predetermine...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in



Cost Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: How is the net cost of inventory calculated?

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a...


Q: Under a perpetual inventory system, what are the four inventory costing methods and how does each me...

A: Definition:


Q: “Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.

A: Department Indirect Cost Rate: Department indirect cost rate is the rate to find out the proportion ...


Q: A corporation issued $2,000,000 of 20-year bonds for cash at 98. How would the transaction be report...

A: Statement of cash flows: It is one of the financial statements that shows the cash and cash equivale...


Q: Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Expla...

A: Definition:


Q: How are financial accountants challenged in their work to make ethical decisions? Is technical maste...

A: Ethical behavior implies taking such actions which are not only as per laws but also confirm to huma...


Q: What is costing system refinement? Describe three guidelines for refinement.

A: Broad averaging is also known as peanut butter cost is a costing approach of distributing the overal...


Q: “You should always choose the supplier who offers the lowest price per unit.” Do you agree? Explain.

A: Click to see the answer


Q: Distinguish between overcosting and undercosting?

A: Over Costing:Over costing is a state in which the estimated or reported cost of a product is more th...