ICANManagement InformationStandard Costing and Variance Analysis2021

Which of the following statements BEST describes a standard cost?

AThe actual cost incurred during a production period as recorded in the cost ledger
BA predetermined cost calculated under specified working conditions, used as a benchmark for performance measurementCORRECT
CThe average cost computed from historical records over the preceding 12 months
DThe marginal cost of producing one additional unit under current market conditions
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Why the answer is B, and why the others tempt you.
A standard cost is a predetermined or target cost established under specified efficient operating conditions, serving as a benchmark against which actual costs are compared to measure performance. It is not a historical average, nor is it the actual cost incurred or a marginal cost concept. Standard costing is a forward-looking planning and control tool widely used in management accounting.
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