Standard cost systems set budgets for the materials, labor, and factory overhead used by a manufacturer to produce its product. Deviations from these standards are reported as variances. In ch.23, we learned that manufacturing firms set standards for the amount and price of direct materials, direct labor, and overhead consumed by their products. Standards establish a benchmark to be used in evaluating actual performance. They allow management to recognize when costs are not in line with the company’s projections and to take corrective action. Standards-variance analysis cost control system can be applied to non-manufacturing businesses, provided that they use repetitive activities to produce a common product or service. Based on your own real-life experience, describe and discuss a non-manufacturing (service) business that could benefit from the use of standards. Also explain how standards would help that business control its operations.

Answer rating: 100% (QA)

Standard c... View the full answer