Companies that use process-costing systems will incur variances if they do NOT incorporate the use of the standard-costing method.

Question

Quizplus · Accepted Answer

Process-costing systems and standard-costing systems are two separate methods of cost accounting. Variances in process-costing systems can be determined and analyzed through methods such as comparing actual costs to budgeted costs or analyzing changes in production volumes. Standard-costing, however, involves setting a predetermined cost for each unit of production and comparing actual costs to that predetermined amount. Therefore, process-costing systems can exist without the use of standard-costing, and there may be variances present even without using standard-costing.

Companies That Use Process-Costing Systems Will Incur Variances If They