Final answer:
Standard cost systems use both actual and standard costs for comparative analysis, aiming to evaluate and manage performance. Variances, which can be favorable or unfavorable, provide valuable insights for corrective actions. Standard costing also relates to alternative measures of costs like fixed, marginal, and average costs as tools for business insights.
Step-by-step explanation:
When Earl stated that he knew all about standard cost systems from taking BUS 202, he should understand that such systems involve utilizing both actual and standard costs (Option A).
Standard costs serve as a budgeted or predetermined benchmark for judging actual performance, whereas the actual costs are what the firm incurs. These two types of costs are compared to understand how well the business is performing against its expectations. Variance analysis is conducted to identify the differences between these two sets of numbers.
It's also crucial to understand that variances don't necessarily indicate a negative event (Option C). Variances can be either favorable or unfavorable, and they provide insights that help management take corrective actions or validate strategies. Lastly, standards are not just used when actual amounts are unavailable (Option D); they are an integral part of budgeting and performance evaluation in standard costing systems.
About the lessons from alternative measures of costs, a standard cost system similarly provides insights for the firm and influences managerial decisions. As with breaking down total costs into fixed, marginal, average total, and average variable costs, standard costing helps in analyzing cost behavior and in planning and control.