Detailed Answer
Answer (D) is correct.
A standard cost is an estimate of what a cost should be under normal
operating conditions based on accounting and engineering studies.
Comparing actual and standard costs permits an evaluation of the
effectiveness of managerial performance. Because of the impact of fixed
costs in most businesses, a standard costing system is usually not
effective unless the company also has a flexible budgeting system.
Flexible budgeting uses standard costs to prepare budgets for multiple
activity levels.
