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ACCA Applied Knowledge · Management Accounting · Standard costing system

Which of the following is a recognised benefit of using a standard costing system?

A recognised benefit of standard costing is that it enables management by exception, because managers can concentrate on significant variances from the standard rather than reviewing every cost. It does not remove the need for budgets and suits repetitive production better than unique jobs.

  1. AIt removes the need to prepare budgets
  2. BIt allows management by exception by focusing attention on significant variancesCorrect
  3. CIt guarantees that actual costs will equal standard costs
  4. DIt is equally suitable for all organisations, including those producing unique one-off jobs

Explanation

Standards provide a benchmark so that only significant variances need investigation, which is management by exception. Standards do not replace budgets or guarantee actual costs. They suit repetitive, standardised production and are less suitable for unique one-off work.

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