Page 112 - BA2 Integrated Workbook - Student 2017

Chapter 7

1.4 Standard costing in the modern business environment

There has recently been some criticism of the appropriateness of standard costing in
the modern business environment:

 Standard costing was developed when business environments were more
stable. In the present dynamic environment, such stable conditions cannot be
assumed. If conditions are not stable, then it is difficult to set a standard cost
which can be used to control costs over a period of time.

 Attainment of standard used to be judged as satisfactory, but in today’s climate,
continuous improvement must be aimed for in order to remain competitive.

 The emphasis on labour variances is no longer appropriate with the increasing
use of automated production methods.

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