The following statements relate to standard costing systems:
I Computation of standard costs and cost variances enables managers to employ management by exception.
II Variances provide a means of performance evaluation and rewards for employees
III Short product life cycles mean that standards are relevant for only a short time
IV Use of standard costs in product costing results in more stable product costs than if actual product costs were used
Which of these statements are considered advantages of standard costing?
A) I, II
B) I, III
C) I, II, IV
D) I, III, IV

Question

Quizplus · Accepted Answer

Standard costing systems offer several advantages, including management by exception (I), which allows managers to focus on significant variances and make adjustments accordingly. They also facilitate performance evaluation and reward systems (II) by providing benchmarks for measuring employee performance. Additionally, using standard costs in product costing leads to more stable product costs (IV), which is beneficial for budgeting, pricing, and decision-making, despite the potential short-term relevance of standards in rapidly changing environments (III).

The Following Statements Relate to Standard Costing Systems