Final answer:
Standard costing is a method used by businesses to establish predetermined costs for materials, labor, and overhead. It is particularly useful in situations where unique, high-cost products are produced.
Step-by-step explanation:
Standard costing is a method used by businesses to establish predetermined costs for materials, labor, and overhead. It is particularly useful in situations where unique, high-cost products are produced.
By using standard costs, businesses can compare the actual costs of producing a product with the expected costs, allowing them to identify any deviations and take appropriate actions to control costs.
For example, if a company manufactures one-of-a-kind luxury cars, standard costing can help determine the expected costs for materials, labor, and overhead associated with producing each car. This information can then be used to assess the profitability of each car and make informed decisions regarding pricing and production.