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- 2 Marks
Question
Identify THREE disadvantages of a standard costing system.
Answer
| Disadvantage | Description |
|---|---|
| Historical Reporting | Reports are prepared after the event, providing information based on historical data rather than current conditions. |
| Demotivational Impact | Inappropriate standards or a focus on negative variances can demotivate employees by emphasizing errors or shortcomings. |
| Assumptions in Efficiency Variances | Efficiency variances often assume labor is variable and that production is solely a function of labor, which may not reflect actual conditions. |
- Tags: Activity-Based Costing, Cost Control, Cost Pools, Overhead Absorption
- Level: Level 2
- Topic: Activity-based costing
- Series: MAY 2018
- Uploader: Joseph