Final answer:
Using standard costs in a firm provides a basis for evaluating cost control, makes employees more cost-conscious, enables management by exception, and may reduce clerical costs. It is also essential to consider both explicit and implicit costs for comprehensive cost management.
Step-by-step explanation:
The question concerns the impact of using standard costs within a firm. Analyzing alternative measures of costs such as fixed cost, marginal cost, average total cost, and average variable cost provides important insights for a firm's cost management and decision-making processes.
Answering the student's question, using standard costs provides a basis for evaluating cost control. It establishes benchmarks that can assist firms in becoming more cost-conscious, as employees know what targets they need to meet. Moreover, standard costs facilitate management by exception, allowing managers to focus on significant deviations from the standards, which streamlines decision-making and may potentially reduce clerical costs due to improved efficiency.
It is important to note that firms may also face explicit costs and implicit costs in their operations. Explicit costs are actual out-of-pocket expenses such as wages and rent, while implicit costs represent the opportunity costs of using owned resources. Understanding these costs can further enhance the effectiveness of using standard costs for control and decision-making purposes.