Which of the following statements regarding standard cost systems is true?
A)Favorable variances are not necessarily good variances.
B)Managers will investigate all variances from standard.
C)The production supervisor is generally responsible for material price variances.
D)Standard costs cannot be used for planning purposes since costs normally change in the future.

Question

Quizplus · Accepted Answer

Favorable variances may indicate that actual costs were lower than expected, but they may also indicate that standards were set too low or that actual production levels were lower than expected. Therefore, favorable variances are not necessarily good variances, and managers need to investigate all variances to understand the underlying causes. Option B is incorrect as managers may not investigate all variances if they fall within an acceptable range of tolerance. Option C is incorrect as the purchasing department typically handles material price variances. Option D is incorrect as standard costs can be used for planning purposes and can help managers monitor and control costs.

Which of the Following Statements Regarding Standard Cost Systems Is