Standard costs have which of the following characteristics? (Check all that apply.)Multiple select question.production managers help determine production requirements for a unit of productthey are useful for manufacturing companies, but not service companiesthey are used to help management understand reasons for variancesthey are developed by the SCAB (Standard Cost Accounting Board)they are preset costs for delivering a product or service under normal conditions
Question
Standard costs have which of the following characteristics? (Check all that apply.)Multiple select question.production managers help determine production requirements for a unit of productthey are useful for manufacturing companies, but not service companiesthey are used to help management understand reasons for variancesthey are developed by the SCAB (Standard Cost Accounting Board)they are preset costs for delivering a product or service under normal conditions
Solution
Standard costs have the following characteristics:
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Production managers help determine production requirements for a unit of product: This is true. Production managers are often involved in the process of determining the standard costs associated with producing a specific unit of product. They have the expertise and knowledge to estimate the resources required, including labor, materials, and overhead costs.
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They are useful for manufacturing companies, but not service companies: This is false. Standard costs are useful for both manufacturing and service companies. In service companies, standard costs can be used to estimate the cost of providing a particular service, which can then be used for pricing, budgeting, and performance evaluation purposes.
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They are used to help management understand reasons for variances: This is true. By comparing actual costs with standard costs, management can identify variances and investigate their causes. This can help in identifying inefficiencies, controlling costs, and making informed business decisions.
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They are developed by the SCAB (Standard Cost Accounting Board): This is false. There is no such entity as the Standard Cost Accounting Board. Standard costs are typically developed internally by a company's management team, often with input from various departments including production, finance, and accounting.
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They are preset costs for delivering a product or service under normal conditions: This is true. Standard costs are essentially budgeted costs for the production or delivery of a product or service. They are based on normal operating conditions and are used as a benchmark against which actual costs can be compared.
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