How do standard cost systems enhance operational control?
A)through efficiency variances, which indicate the need for corrective action
B)through price variances, which indicate the need for better spending control
C)through standard costs, which indicate the desired cost of a unit of input
D)through actual costs, which indicate the price received for units sold

Question

Quizplus · Accepted Answer

Standard cost systems enhance operational control through efficiency variances, which identify deviations from the standard cost and indicate the need for corrective action. This helps management to identify and address operational inefficiencies and improve overall performance. Price variances (option B) are related to purchase price and do not necessarily enhance operational control. Standard costs (option C) represent the expected cost of a unit of input and do not, by themselves, enhance operational control. Actual costs (option D) are historical costs and do not necessarily help to improve future operational control.

How Do Standard Cost Systems Enhance Operational Control