Discuss how establishing standards benefits the following management functions: performance evaluation and decision making

Performance evaluation is enhanced by the use of standard costs because it allows management to pinpoint deviations from standard costs and points out variances. The variances are analyzed and individual responsibility can be assessed for the variances, depending on the nature of the causes.

The availability of standard cost information facilitates many decisions. These costs can be used in budgeting, cost estimates for jobs, and determining contributions made by various product lines; and, thus, can be used to decide whether to add new lines or drop old lines.