ECONOMICS

Detailed explanation-1: -Standard cost is used to identify the variances between the actual cost incurred and the cost that should have occurred to produce the goods in normal conditions. Standard cost is a predetermined cost.

Detailed explanation-2: -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)

Detailed explanation-3: -A Standard Cost is a predetermined unit cost based on expected direct materials quantities and expected direct labour time, and priced at a predetermined rate per unit of direct materials and rate per direct labour hour and rate per hour of overhead.

Detailed explanation-4: -a) Standard cost is an estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions. b) Standard costing is a control technique that reports variances by comparing actual costs to pre-set standards so facilitating action through management by exception. 22.