Which of the following statements is correct?
A) Establishing standards is the least difficult aspect of using a standard cost system.
B) Managers should be praised or punished based on variances.
C) A favorable variance may indicate the existence of unfavorable conditions.
D) Budget slack exists when performance standards are set at an ideal, unachievable level.

Question

Quizplus · Accepted Answer

A favorable variance, while seemingly positive, can sometimes indicate issues such as cost-cutting that compromises quality, underestimation of costs, or other operational inefficiencies.

Which of the Following Statements Is Correct