Question

What is a standard cost?

1)The total number of units times the budgeted amount expected
2)Any amount that appears on a budget
3)The total amount that appears on the budget for product costs
4)The amount management thinks should be incurred to produce a good or service

Answer 1

A standard cost is the amount management thinks should be incurred to produce a good or service. It represents the expected cost of resources required to produce one unit of output. Option 4.

Step-by-step explanation:

A standard cost is the amount management thinks should be incurred to produce a good or service. It is a predetermined cost that serves as a benchmark for evaluating actual costs. It represents the expected cost of resources required to produce one unit of output.

For example, if a company determines that the standard cost to produce a widget is $10, and it expects to produce 100 widgets, the total standard cost would be $1,000 ($10 x 100). The standard cost is used for budgeting, evaluating performance, and identifying variances between actual costs and the expected standard costs.

So Option 4 is the correct answer.