Usefulness of Standard Costs in Controlling Costs

question 103

Essay

Usefulness of standard costs in controlling costs
Standard costs are said to be useful in controlling costs. Assume that the standard cost for raw materials per unit of finished product is $6.00 based on 3 kg at $2.00 per kg.
i. Explain how such a standard can be used to evaluate performance.
ii. Why is the degree of controllability important in utilising standard costs to evaluate performance?

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Definitions:

Total Percentage Return

The total return on an investment, expressed as a percentage, that includes all dividends, interest, and capital gains.

Dividend

Money given to shareholders by a corporation, usually sourced from the firm's profits.

Dividend Yield

A measurement in finance that compares the dividends a company pays each year with its stock price.

Dividend

A portion of a company's earnings that is distributed to shareholders, usually on a quarterly or annual basis.