Q20RQ - Horngren'S Financial And Managerial Accounting

Question

Question: What is a standard cost income statement?

Step-by-Step Solution

Answer

Answer

The standard cost income statement focuses on variances for the management

Step 1 Definition of the income statement

An income statement is defined as the financial statement which reports the revenues generated by the company and expenses incurred during the year to compute net income.

Step 2 Standard cost income statement

A standard cost income statement shows the manufacturing variances for management. It does not change the actual operating income calculated; rather it only focuses on the variance from standards. 

This type of income statement is used by the managers and accountants of the company to easily and quickly access the variances which needs the attention of the managers.