In standard costing, a standard cost is best described as:
Correct answer: B. A predetermined cost under specified operating conditions
- A. The actual cost paid after production is completed
- B. A predetermined cost under specified operating conditions
- C. The maximum price charged to a customer
- D. The total cash balance available to a business
Explanation
A standard cost is predetermined for a product or service under stated conditions of efficiency and price. Actual costs are later compared with standards to identify and analyse variances.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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