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REQURIEMENT: - EXPOUND THE EXPLANATION ( TAGLISH) - FOR MY REPORT THANKS LIMITATIONS OF STANDARD COST Although the advantages of using standard costs are significant,

REQURIEMENT:

- EXPOUND THE EXPLANATION ( TAGLISH)

- FOR MY REPORT THANKS

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LIMITATIONS OF STANDARD COST Although the advantages of using standard costs are significant, certain difficulties can also be encountered by the manager. The following are some of the problems or potential problems in using standard costs: 1. Difficulty may be encountered in determining which variances are material or significant in amount to warrant investigation. 2. Other useful information such as trends may not be noticed at an early stage since attention is focused only on variances above a certain level. 3. Subordinates may be tempted to cover up unfavorable exceptions or not report them at all, particularly when they do not receive reinforcement or commendation for the positive things they do. This is a possible consequence of applying the principle of management by exception. 4. The management by exception technique may also affect supervisory employees in an unsatisfactory manner because they may feel that they are not getting complete review of operations as they are always just keying it in on problems. Also, supervisors may feel they are being constantly critical of their subordinates and this may have a negative impact on their morale. These possible problems and difficulty suggest that extreme care must be exercised by the manager in adopting a standard cost system. It is particularly important that managers go out of their way to focus on the positive rather than on the negative, and to be aware of possible unintended consequences

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