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Questions and Answers
- Which of the following best describes the primary purpose of standard costs in a manufacturing
setting?
- Which of the following best describes the primary purpose of standard costs in a manufacturing setting?
- To solely monitor direct material and labor costs within a production process.
- To facilitate the allocation of factory overhead without variance analysis.
- To provide a basis for comparing actual costs against predetermined benchmarks (correct)
- To establish benchmarks for forecasting actual manufacturing expenses.
What comprises the elements included in standard costs?
What comprises the elements included in standard costs?
- Direct materials, indirect labor, and factory overhead (correct)
- Direct materials, direct labor, and variable overhead
- Direct materials, direct labor, and fixed overhead.
- Indirect materials, direct labor, and variable overhead.
Why is proper cost control dependent on comparing actual costs with standard costs?
Why is proper cost control dependent on comparing actual costs with standard costs?
- To identify deviations from budgeted expenses. (correct)
- To enforce strict budget adherence.
- To encourage overproduction to meet standards.
- To eliminate the need for variance analysis.
What do standard costs help to identify?
What do standard costs help to identify?
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What is an advantage of using standard costs in a manufacturing setting?
What is an advantage of using standard costs in a manufacturing setting?
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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.
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