Final answer:
The standard cost for a product or service involves the same communication as in the budgeting process, considering both fixed and variable costs, along with historical costs to establish benchmarks. The correct option is C.
Step-by-step explanation:
Developing a standard cost for a product or service will usually involve the same kind of communication involved in the overall budgeting process. This approach is a collaborative effort that typically requires input from various departments, not just cost accounting personnel.
It encompasses considering both fixed costs and variable costs, as well as looking at historical costs and performance levels to establish benchmarks. However, it's crucial to remember that in a short-run perspective, fixed costs are sunk costs and should not influence economic decisions about future production or pricing.
On the other hand, variable costs often show diminishing marginal returns, indicating that the marginal cost of producing higher levels of output rises.