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What Is The Criticism On Standard Costing System

Question

1. Variable overhead efficiency variance occurs as the result of:

  • The efficient or inefficient usage of electricity, indirect material or other variable overhead items.
  • The efficient or inefficient use of the cost drivers, such as direct labor hours or machine hours, that are used to apply variable overhead.
  • Producing completed units for finished goods inventory instead of producing completed units for sale.
  • A difference between the budgeted amount of units sold and the actual amount of units sold.

2. Which of the following is not a criticism of standard costing systems?

  • Variances are too aggregated and concentrate on the consequences rather than the causes of the problems.
  • Variance analysis explicitly encourages continuous improvement.
  • Standard costing systems place too much emphasis on the cost and efficiency of direct labor.
  • Variance reports are produced too late to be useful.

 

Summary

These multiple choice questions belong to Accounting. The 1st question discusses about variable overhead efficiency variance and the 2nd question is about the criticism for standard costing system.

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