Q1. A major information source within many businesses is a system of standard costing and  

variance analysis.

Required:

(a) Describe briefly four purposes of a system of standard costing.

(b) Explain three different levels of performance which may be incorporated into a

system of standard costing and comment on how these may relate to the purposes

set out in (a) above.

(c) Comment on whether standard costing applies in both manufacturing and service

businesses and how it may be affected by modern initiatives of continuous

performance improvement and cost reduction.

(d) A standard costing system enables variances for direct costs, variable and fixed

overheads to be extracted. Identify and briefly discuss some of the complexities

and practical problems in calculation which may limit the usefulness of those

variances.