Chapter 22, Problem 7DQ

To determine

Standard Costs:

In the accounting records, the term standard cost refers to the practice of replacement of an expected cost for an actual cost. Then the difference between the expected costs and actual costs showing the variance are also recorded periodically. A standard costs is also known as target cost or predetermined cost. Generally, the manufacturing companies use standard costs for each of the three product costs which are given as follows:

1. 1. Direct materials cost
2. 2. Direct labor cost, and
3. 3. Factory overhead cost

To identify: Whether the use of standards would be appropriate in a nonmanufacturing setting such as a fast-food restaurant.