ECONOMICS

Detailed explanation-1: -Direct material cost is the cost of the raw materials and components used to create a product. The materials must be easily identifiable with the resulting product (otherwise they are considered to be joint costs).

Detailed explanation-2: -Standard costs are estimates of the cost of goods sold–that is, the cost required to produce your products. They usually consist of three parts: direct materials, direct labor, and manufacturing overhead.

Detailed explanation-3: -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. The variances are not being closed and transferred to the sales revenue account in the standard costing system.

Detailed explanation-4: -Formula to calculate standard costs Direct labour = employee hourly rate x no. of hours worked x total number of units. Materials cost = market price per unit x total number of units. Manufacturing overhead = fixed overhead + (variable manufacturing overhead x total number of units)