5 Questions
- Which of the following best describes the primary purpose of standard costs in a manufacturing
setting?
To provide a basis for comparing actual costs against predetermined benchmarks
What comprises the elements included in standard costs?
Direct materials, indirect labor, and factory overhead
Why is proper cost control dependent on comparing actual costs with standard costs?
To identify deviations from budgeted expenses.
What do standard costs help to identify?
Variances between actual and standard costs
What is an advantage of using standard costs in a manufacturing setting?
Improved cost control and identification of variances
Study Notes
Standard Costs in a Manufacturing Setting
- Standard costs primarily serve to provide a basis for comparing actual costs against predetermined benchmarks.
- The primary purpose of standard costs is not to establish benchmarks for forecasting actual manufacturing expenses.
- Standard costs are not solely used to monitor direct material and labor costs within a production process.
- Standard costs do not solely facilitate the allocation of factory overhead without variance analysis.
This quiz tests your understanding of standard costs in a manufacturing setting, its primary purpose, and how it is used for cost comparison and forecasting.
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