Routine maintenance services are provided by Latamore Industries to oil and gas firms in their production facilities. Although many of the client services are relatively unique, some services are repetitive. The firm individually negotiates prices with each client. The CFO of Latamore Industries recently examined the profitability of a sample of the firm’s service contracts and was surprised that contract profit amounts varied significantly. Additionally, production inputs (such as material and labor) often varied substantially from those budgeted at the time the service contracts were negotiated. The CFO has asked you, as a company intern, to write a memo describing how the adoption of standard costing could improve cost control and profit management for the firm’s service contracts.