Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Standard Costs

Predetermined costs for the production of goods or services, used as benchmarks to measure actual performance and manage costs.

Actual Costs

Actual costs are the genuine expenditures incurred by a company, as opposed to estimated costs, during a given period for production, services, or other activities.

Reasonableness

A test or criterion to evaluate whether the assumptions or outputs of a financial model or decision are logical and align with real-world expectations.