How Companies Set Standard Costs

Instructions:

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question 1 of 3

Which of the following is a standard cost?

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1. Bob is creating a budget based on standard costs. Which of the following costs may create the greatest variance from the budget?

2. When is a variance in standard costs favorable?

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About This Quiz & Worksheet

Standard costs are an important part of a budget. Use this quiz and the printable worksheet to test your knowledge of what standard costs are, as well as the importance of variances.

Quiz & Worksheet Goals

These questions about budgets will test you on:

  • Components of standard cost
  • Types of variances
  • Advantages of standard costs

Skills Practiced

You can use this quiz as a tool to practice the following abilities:

  • Reading comprehension - ensure that you draw the most important information from the related lesson on how companies set standard costs
  • Knowledge application - use your knowledge to identify an example of standard cost
  • Defining key concepts - ensure that you can accurately define main phrases, such as favorable and unfavorable variance

Additional Learning

If you'd like to learn more about standard costs, you can explore the lesson that accompanies this quiz, titled How Companies Set Standard Costs. Information covered by this lesson includes:

  • Budgetary uses for standard cost
  • Ways to set standard cost
  • The three major components of standard cost
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