Managers should exercise considerable care in their use of a standard costing system

Question

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Standard costing systems offer several advantages, such as facilitating cost control, simplifying inventory valuation, and providing a basis for variance analysis. However, there are also potential problems associated with their use, such as the possibility of inaccuracies arising from imprecise standards, the tendency of standard costs to become outdated, and the potential for employees to manipulate the system to achieve short-term targets at the expense of long-term goals. Therefore, managers should use standard costing systems with care and be aware of their limitations.

Managers Should Exercise Considerable Care in Their Use of a Standard