Standard cost is defined as

Standard cost is defined as

• A. Budgeted cost for the entire period only
• B. The average cost of material usage
• C. Carefully predetermined unit cost, used as a target against which variances are tracked
• D. Actual cost incurred during production

Answer: (C)

Standard cost is a carefully predetermined unit cost used as a target against which variances are tracked. It’s set for materials, labor, and overhead based on normal operating conditions and expected efficiency, so managers can compare what actually happened with what should have happened for each unit produced. This per-unit benchmark lets you calculate variances—price, usage, and efficiency—so you can analyze performance and control costs, rather than just looking at what was actually spent or what was planned for the whole period. It isn’t the total budget for the period, nor the actual cost incurred, nor simply the observed average cost of material usage; it’s a planned, standard reference per unit that guides planning and performance measurement.

Standard cost is a carefully predetermined unit cost used as a target against which variances are tracked. It’s set for materials, labor, and overhead based on normal operating conditions and expected efficiency, so managers can compare what actually happened with what should have happened for each unit produced. This per-unit benchmark lets you calculate variances—price, usage, and efficiency—so you can analyze performance and control costs, rather than just looking at what was actually spent or what was planned for the whole period. It isn’t the total budget for the period, nor the actual cost incurred, nor simply the observed average cost of material usage; it’s a planned, standard reference per unit that guides planning and performance measurement.