Question

Which of the following is a reason companies use standard costs?

A) to enhance customer loyalty
B) to ensure the accuracy of the financial records
C) to share best practices with other companies
D) to identify performance standards

Answer 1

Standard costs are used by companies to ensure accuracy, set performance standards, and share best practices.

Step-by-step explanation:

Companies use standard costs for several reasons:

• To ensure the accuracy of financial records: Standard costs provide a benchmark against which actual costs can be compared, allowing companies to identify discrepancies and take corrective actions.
• To identify performance standards: Standard costs help companies set targets and measure their performance against these targets. By comparing actual costs to standard costs, companies can identify areas of improvement and make informed decisions.
• To share best practices with other companies: Standard costs can be used as a common language in the industry, allowing companies to compare their performance and share insights on best practices.