Which of the Following Best Defines Standard Costing

question 32

Multiple Choice

Which of the following best defines standard costing?

• A) It is the same as actual costing but done in real time.
• B) It is a system that traces direct cost to output by multiplying actual process or rates by actual quantities of inputs + allocates overhead by on the basis of actual quantities of the allocation base used.
• C) It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced.
• D) It is a system that allocates overhead costs on the basis of standard overhead cost rates times the actual quantities of the allocation based used.

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Definitions:

Labor Rate Variance

The difference between the actual labor rate paid and the standard labor rate expected, indicating over or underpayment.

Budget Variance

The difference between the budgeted amount of expense or revenue, and the actual amount of expense or revenue incurred.

Volume Variance

The difference between the budgeted fixed overhead and the applied fixed overhead, which is usually driven by a difference in actual production volume and the expected production volume.

Materials Price Variance

The variance between the real expense of materials and their anticipated (standard) price.