Asked by Melisa Di?isa?lam on Jul 12, 2024
Verified
Which of the following could result in a situation where the use of a standard cost system to control labour costs might not be the most useful?
A) Standards are viewed by employees as reasonable.
B) Manufacturing is highly automated.
C) There is a desire to simplify the accounting for costs of items manufactured.
D) The integration of costing with responsibility accounting.
Standard Cost System
An accounting system that uses standard costs for product costs, facilitating budgeting and performance evaluation.
Direct Labour Hours
The total time workers spend producing a product or service, which directly correlates to the production.
- Identify the constraints and obstacles associated with the adoption of a standard costing system.
Verified Answer
DT
Danielle ThompsonJul 13, 2024
Final Answer :
B
Explanation :
When manufacturing is highly automated, the use of direct labour hours as a basis for assigning variable overhead costs becomes less meaningful. This is because the amount of direct labour required to produce a given quantity of output decreases as automation increases. In such cases, alternative allocation bases such as machine hours or units of output may be more appropriate for assigning variable overhead costs. Standards being viewed as reasonable, a desire to simplify the accounting for costs, and the integration of costing with responsibility accounting are not relevant to the usefulness of a standard cost system for controlling labour costs.
Learning Objectives
- Identify the constraints and obstacles associated with the adoption of a standard costing system.
Related questions
In Which of the Following Situations Would the Use of ...
Which of the Following Is Not a Limitation of Standard ...
One of the Main Criticisms of Standard Costing Systems Is ...
Consider the Following Statements Regarding Traditional Costing Systems ...
Traditional Product Costing Systems Result in Inaccurate Product Costs When ...