Which of the Following Is True Regarding Standard Cost Systems

question 153

Multiple Choice

Which of the following is true regarding standard cost systems in manufacturing environments that emphasize continuous improvement and just-in-time manufacturing and purchasing?

• A) The standard cost system enhances the operational control.
• B) The materials price variance may encourage the purchasing department to buy in smaller quantities to reduce inventories.
• C) Variances can be computed and presented in reports to higher-level managers.
• D) The operational level will benefit from the detailed computation of variances.
• E) None of these.

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Definitions:

Target Cost

The desired cost of a product as determined by its expected selling price minus desired profit, aimed to ensure competitiveness and profitability.

Preventive Maintenance

Maintenance activities carried out regularly on equipment to prevent unexpected failures.

Performance Capabilities

The ability of a company or product to function effectively, often measured against predetermined standards or competitor offerings.

Value-Based Pricing

A pricing strategy where prices are set primarily based on the perceived value to the customer rather than based on the cost of the product or historical prices.