COST ACCOUNTING
STANDARD COSTING AND VARIANCE ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Standard costing is a useful technique in dynamic environments.
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Standard costing is less useful in today’s environment because simply achieving standard is no longer seen as acceptable.
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Standard costing has been criticised as it generally places emphasis on labour variances which is no longer appropriate with the increasing use of automated production techniques
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Standard costing is only really useful in manufacturing environments.
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Standard costing encourages companies to strive for continuous improvement.
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Detailed explanation-1: -Under the Standard Costing System, which of the following actions is true about the cost variance? Explanation: The real cost of material cost, direct labor, and administration to produce a unit of product is known as actual cost. Variance is the difference between the actual and standard costs.
Detailed explanation-2: -The major limitations of Standard Costing are that it is not suitable for all industries and products, its method of cost setting is complex and time-consuming, and that it requires the services of experts.
Detailed explanation-3: -Standard costs are based on scientific analysis and engineering studies while estimated costs are based on historical basis. Standard cost emphasis is on “what cost will be” while estimated cost emphasis is on “what cost should be”. Standard costs are more frequently revised compared to estimated cost.