Chapter 8 1. Standard costs are based solely on actual costs incurred in past. a

Question

Chapter 8

1. Standard costs are based solely on actual costs incurred in past.

a. True

b. False

2. Cost centers have well-defined links between the cost of the resources and the resulting products.

a. True

b. False

3. Although expensive to install and maintain, a standard cost accounting system can save a company considerable amounts of money by reducing resource waste.

a. True

b. False

4. Standard costing can be used only with a process costing system.

a. True

b. False

5. Comparing “what did happen” with “what should have happened” aids in the performance evaluation of a company.

a. True

b. False

Explanation / Answer

1. b. False

Standard costs are based upon what we expect them to be during the period of manufacture in the future.They are realistic estimates of future operating costs.Standard costs are NOT actual costs.

2. a. True

A Cost center is a responsibility center whose manager is accountable only for costs in which the relationship between resources and products or services produced is not well defined.

3. a. True

The vast majority of manufacturing companies use standard costing.It is true that a standard costing system is expensive to install and maintain.Standard costing can be used in conjunction with job order or process costing.

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