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Asked Dec 24, 2019
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What is a standard cost? Explain? Give an example?

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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...

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Business

Accounting

Cost Accounting

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