Standard Product Costs

The video tutorial explains the concept of standard costing, a method authorized by the Cost Accounting Standards Board to estimate production costs, including direct materials, labor, and overhead. It discusses how standard costs are used in budgeting, cost control, and determining inventory costs, which are crucial for assessing profitability. The tutorial also covers setting prices using standard costs, particularly in cost-plus pricing strategies, and highlights the importance of comparing estimated costs with actual costs to identify variances.

What are the components included in the estimation of standard product costs?

• Direct materials, marketing expenses, and administrative costs

• Direct materials, direct labor, and manufacturing overhead

• Direct labor, manufacturing overhead, and administrative costs

• Direct materials, direct labor, and marketing expenses

What is the term used to describe the difference between estimated and actual costs?

• Deficit

• Surplus

• Balance

• Variance

How does standard product cost assist in budgeting?

• By increasing the overall budget

• By providing a benchmark for resource allocation

• By eliminating the need for a budget

• By reducing the quality of products

What is a key function of cost control in managerial operations?

• To reduce product quality

• To increase production time

• To promote efficiency and effectiveness

• To expand the workforce

In cost-plus pricing, what is added to the production cost to determine the final price?

• A margin

• A subsidy

• A tax

• A discount