Advanced In recent years, writers have argued that standard costing and variance analysis should not be used for cost control and performance evaluation purposes in today’s manufacturing world. Its use, they argue, is likely to induce behaviour which is inconsistent with the strategic manufacturing objectives that companies need to achieve in order to survive in today’s intensely competitive international economic environment.

Requirements:

(a) Explain the arguments referred to in the above paragraph concerning the relevance of stan¬ dard costing and variance analysis.

(10 marks)

(b) Explain the arguments in favour of the rel¬ evance of standard costing and variance analy¬ sis in the modem manufacturing environment.

(8 marks)

(c) Suggest methods that might be used by management accountants to control costs and evaluate efficiency as alternatives or complements to standard costing and variance analysis. (7 marks)

(Total 25 marks) CIMA Stage 3 Management Accounting Applications