There Are Many Who Support Using Standard Costing and as Many

question 6

Essay

There are many who support using standard costing and as many again who are critical of this traditional approach to help control costs. Briefly discuss three advantages and three disadvantages of using a traditional standard costing system

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Definitions:

Risk Averse

A term describing investors or consumers who prefer lower risk and are willing to accept lower returns in exchange for increased certainty or safety.

Market Risk Premium

The additional return an investor expects to receive from holding a risky market portfolio instead of risk-free assets.

SML

Stands for Security Market Line, a graphical representation of the expected return of investments at different levels of systematic, or market, risk.

Beta

An indicator of how much a stock's price is expected to fluctuate, compared to fluctuations in the overall stock market.