Question

What is a standard cost? a.The total number of units times the budgeted amount expected b.The total amount that appears on the budget for product costs Any amount that appears on a budget c.The amount management thinks should be incurred to produce a good or service

Answer 1

Answer: Option c

Explanation: In simple words, standard cost refers to the estimated amount of resources that an organisation thinks would be incurred to produce a specified amount of goods or service for the product.

These estimates are based on past experiences and future expectations, therefore, these are not certain and have a high chance that a difference will occur in actual performance. These estimates works as a guideline for performance, thus, it is prepared by the top managers of the departments of the entity.