Can You Highlight Some Of The Potential Problems With The Use Of Standard Cost?

Some of the problems are as follows:

1. Standard cost variance reports are usually prepared on monthly basis and are released after weeks during the end of the month. This makes the information outdated.


2. Managers can be insensitive to the variance reports


3. Labor quantity standards and the efficiency problems


4. In some situations, the favorable variance can be bad or worse as compare to unfavorable variance


5. Too much emphasis on meeting the standards can overshadow other objectives


6. Continual improvement is not considered which is very important

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