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 1^st question discusses about variable overhead efficiency variance and the 2^nd question is about the criticism for standard costing system.

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