Standard Costs Are Said to Be Useful in Performance Evaluation

question 17

Essay

Standard costs are said to be useful in performance evaluation. Assume that the standard direct materials cost per unit of finished product is $6 (three pounds at $2 per pound).
Required:
A. Explain how such a standard can be used to evaluate performance.
B. Why is the degree of controllability important when utilizing standard costs to evaluate performance?

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Definitions:

General Physical Examination

An examination performed by a physician to confirm a patient’s health or to diagnose a medical problem.

Diagnose

The process of identifying a disease or condition from its symptoms and signs through examination, testing, and analysis by a healthcare professional.

Health

The state of being free from illness or injury, encompassing physical, mental, and social well-being.

Work Surfaces

Areas or countertops in a workplace where tasks are performed, requiring regular cleaning and maintenance to ensure a safe and efficient environment.