ECONOMICS

Detailed explanation-1: -Standard costing is the practice of estimating expenses in the production process since manufacturers cannot predict actual costs in advance. Manufacturers use this methodology to plan upcoming costs of various expenses, such as labour, materials, production and overhead.

Detailed explanation-2: -Under standard costing, the value of inventory is determined using the material and material overhead standard costs of each inventory item. If you use Bills of Material, Inventory maintains the standard cost by cost element (material, material overhead, resource, outside processing, and overhead).

Detailed explanation-3: -Standard costing, also known as standard cost accounting, is used to set budgets and plan for future expenses. It is a type of cost accounting mainly used in the manufacturing sector because it is easier to allocate costs directly to products being produced.

Detailed explanation-4: -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.

Detailed explanation-5: -Why Do Companies Use Standard Costs? Companies use standard costs for budgeting because the actual costs cannot yet be determined. This is because in the manufacturing process, it is impossible to predict the demand of a product or all the variables that will affect the costs of manufacturing it.