Which statement is correct concerning the costing of inventories at standard cost for external financial statements?
Which statement is correct concerning the costing of inventories at standard cost for external financial statements? GAAP allows companies to report cost of goods sold and inventories at standard cost and to disclose the variances separately if the differences between actual and standard costing are immaterial.
Which costing is generally used for external financial reports?
Under generally accepted accounting principles (GAAP), absorption costing is required for external reporting. Absorption costing is an accounting method that captures all of the costs involved in manufacturing a product when valuing inventory.
What is standard inventory cost?
Standard Cost Inventory Standard costing is when companies assign the expected (or standard) costs of material, labor and overhead to inventory, rather than the actual costs. This management tool helps to plan budgets, manage and control costs and determine how successfully a company controls cost.
Can indirect costs be used for external reporting?
Generally accepted accounting principles and international financial reporting standards require that a company allocate indirect costs to its inventory asset for external reporting purposes.
What is the purpose of standard costing?
Standard costing aims at eliminating waste and increasing efficiency in operation through setting up standards for production costs and production performance. In short, standard costing is a control device and not a separate method of product costing.
Which of the following is a purpose of standard costing?
The purpose of standard costing is to control cost and promote efficiency.