Which statement is true regarding a standard cost system?
A) Both actual and standard costs are used.
B) Only standard costs are used.
C) If variances occurred, then something negative in the operations has occurred.
D) Standards are used only when actual amounts are not available.

Question

Quizplus · Accepted Answer

A standard cost system uses both actual and standard costs. Actual costs are used to compare against the standard costs to identify variances and help management make decisions about the operations. The presence of variances does not necessarily mean something negative has occurred, as some variances can be favorable and some can be unfavorable. Standards are used as benchmarks for evaluating performance and making decisions, not just when actual amounts are not available.

Which Statement Is True Regarding a Standard Cost System