Question

Standard cost systems can enhance operational control through the use of

a.actual costs which indicate the price received for units sold.

b.efficiency variances which indicate the need for corrective action.

c.price variances which indicate the need for better spending control.

d.standard costs which indicate the desired cost of a unit of input.

e.All of these choices are correct.

Answer 1

The correct option is option b. efficiency variances which indicate the need for corrective actions.

Explanation- The standard costing system is used to calculate the difference between the standard and the actual i.e. whether the activities of the company are as per the standards or not. Thus the standard costing helps in taking corrective actions which can enhance the operational control of the company.

So the standard costing system can enhance the operational control through the use of efficiency variances which indicate the need for corrective actions. There are many types of variances calculated in standard costing system which are very useful for the company.

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