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Standard costing is primarily used to:
AReplace historical costing for all reporting purposes
BProvide a base for control through variance analysis and for fixing selling prices
CInflate inventory values for external reporting
DEliminate the need for actual cost recording
Answer & Solution
Correct answer: B. Provide a base for control through variance analysis and for fixing selling prices
1. Standard costs are predetermined costs computed in advance of production.
2. Variances (actual vs standard) are analysed for control purposes.
3. Standard costing also supports stock and WIP valuation and price-fixing.
_Source: ICMAI BoS CMA Foundation Paper 2 (Cost Accounting), Module 4 §4.1-4.2 (Methods & Systems of Costing), p. 297-308_