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.

Detailed explanation-2: -Method of cost using standard costs provides better visibility and chances to improve the performance, as the variances can be useful to identify the issues in the production and manufacturing process.

Detailed explanation-3: -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-4: -According to the formula, the product’s standard cost is calculated by adding the value of the direct material costs, the value of the direct labor costs, the value of the total variable overheads, and the value of the total fixed overheads during the period.