ECONOMICS

Detailed explanation-1: -Standard costs serve as a device for measuring efficiency. The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance. The standard cost is how much a product should cost to manufacture.

Detailed explanation-2: -Answer and Explanation: Option (D) is the correct answer. Standard cost is used as the tool for measuring efficiency for controlling the cost of production. Standard cost is part of the cost accounting process.

Detailed explanation-3: -The standard cost is the expected amount paid for materials or labor rates. The standard quantity is the expected usage amount of materials or labor. A standard cost may be determined by history or industry norms. The company can then compare the standard costs against its actual results to measure its efficiency.

Detailed explanation-4: -Standard costs are based on scientific analysis and engineering studies while estimated costs are based on historical basis. Standard cost emphasis is on “what cost will be” while estimated cost emphasis is on “what cost should be”. Standard costs are more frequently revised compared to estimated cost.