Final answer:
The purpose of standard costing is to provide management with a tool for planning and control, by setting benchmarks for costs, and not to replace budgets or eliminate the need for actual costing and associated accounting procedures.
Step-by-step explanation:
A purpose of standard costing is to simplify costing procedures. Standard costing involves setting predetermined costs for materials, labor, and overhead, and comparing them to actual costs incurred. This allows businesses to identify any variances and investigate the reasons behind them. Standard costing also provides a benchmark for measuring performance and making decisions.
A purpose of standard costing is not to eliminate the need for actual costing for external reporting purposes but to provide a way for management to plan and control costs by setting predetermined costs for products or services. Standard costing involves comparing actual costs to standard costs, with variances analyzed to help improve efficiency and productivity. This method simplifies budget control and provides a benchmark for measuring performance, but it does not replace the comprehensive budgeting process. Furthermore, it does not eliminate the need for tracking actual costs nor does it remove the necessity of accounting for year-end underapplied or overapplied manufacturing overhead. These figures are essential for accurate external reporting and internal cost management.