An Important Advantage of a Standard Cost System Is That

question 107

Multiple Choice

An important advantage of a standard cost system is that standard costs:

• A)Cause financial statements to be more comparable because different companies cost their inventories in the same manner.
• B)Can be determined with great precision so that inventories are valued with complete accuracy.
• C)Cause a lower net income,resulting in lower income taxes.
• D)Focus attention on trouble spots and facilitate prompt corrective action.

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Definitions:

Profits

The financial gain made in a transaction or operation, calculated as the difference between revenue and costs.

Compounded Annually

This refers to the process where interest is added to the principal sum, so that from that moment on, the interest that has been added also earns interest, being calculated and added to the account annually.

Simple Interest

Interest calculated on the principal amount of a loan or deposit, without compounding over time.

Savings Account

A deposit account held at a bank that provides interest on the funds deposited.