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Question

Which of the following statement is true regarding standard costing?

A Standard Costs are arrived on the basis of costs incurred in the past Correct Answer Incorrect Answer
B There is no difference between standard costing and budgeting Correct Answer Incorrect Answer
C Standard Costing is most relevant in Banking Industry Correct Answer Incorrect Answer
D Standard Costs are based on technical assessments Correct Answer Incorrect Answer
E All are true Correct Answer Incorrect Answer

Solution

Standard cost is set on the basis of management’s estimation. Cost is estimated on the basis of technical specification provided by the engineering department or other expert such as production engineer. Generally, while setting standards, consideration is given to historical data, current production plan and expected conditions of future. Standard costing is different from budgeting. Standard costs are used to set budgets and based on these budgets managerial performance is evaluated. Standard costing is most widely used in manufacturing industry but may be applied in various other industries too.

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