Answered: What are standard costs and why do…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter8: Standard Costs And Variances

Section: Chapter Questions

Problem 5TP: Why would managers use a flexible budget? What information does it provide that a regular budget...

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What are standard costs and why do companies use standard costs? Discuss the difference between ideal and practical standards. Which is most useful to a company and why? In your opinion, what are the two most significant advantages and disadvantages of using standard costs? Support your opinion. What is a static planning budget? Is it useful? Why or why not? What is a flexible budget? How does it differ from a static planning budget? Explain why the flexible budget more useful than the static planning budget.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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