ECONOMICS

Detailed explanation-1: -When standard costs are used, factory overhead is charged to production by means of a predetermined standard overhead rate.

Detailed explanation-2: -When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate. Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards. A cost variance is the difference between actual cost and standard cost.

Detailed explanation-3: -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-4: -The statement is TRUE. Suppose, for example, a company uses direct labor hours as its overhead application activity. The standard says that each unit should use 1.5 direct labor hours and the company manufactured 100, 000 units using 140, 000 direct labor hours.