Answer:
Its true because computing average cost is far much easier than the actual cost calculation. The reason is tha we use standard costs for each element of costs. For Example, If we talk about the standard usage of cloth (material) which is 4m per unit at the rate $5 per metre. It is possible that the actual usage might be 3.8m and it is also possible the actual usage is 4.2m for a unit product. So we have to use standard Rate to make our calculations simple. Remember this standard Rate is average rate of material usage. Likewise when we say one chair takes standard 1 hour of labour, it doesn't mean that the chair in actual takes one hour. It might be 0.9 Hrs per chair for 2 chairs and the next one has taken 1.2 Hrs of labour because of labour inefficiency or any other reasons. So these are the average Rates that we set as standard to achieve and also to make our calculations simple.