Question

What is One Advantage of Standard Costs and One Potential Problem with using Standard Costs? Do you feel the benefits outweigh the problems with using Standard Costs as a Manager?

Answer 1

Advantage :Standards costing helps in cost control:

Since in standard costing for each cost incurred by the company , standard cost is set.

Variance in Actual and Standard cost, help the organization is assessing areas of inefficiency if any, and areas that need improvement, it acts as an early warning system for the management

Disadvantages: Not all variance may be reported completed and correctly, as certain variance may highlight inefficiencies of employee, which could be concealed by them

Yes, the benefits outweigh as it helps management in budgeting, cost control, more easier way to record inventory, may even help in cost reduction