## Criticism of Standard Costing
Standard costing is a widely used tool, but it has well-documented limitations. The CA exam often asks you to state and explain these criticisms.
### The Eight Criticisms
| # | Criticism | Core Problem | Mitigation |
|---|---|---|---|
| i | Variation in price | Fluctuating market prices make standard prices hard to set | Forecasting techniques; isolate uncontrollable variances |
| ii | Varying output levels | Failure to hit standard output distorts cost realization | Variance analysis can estimate output reasonably; prime costs unaffected |
| iii | Changing technology | Frequent tech changes render standards obsolete quickly | Apply principle of cost reduction; revise standards periodically |
| iv | Attitude of technical staff | Technical personnel confuse standards with standard costs | Orientation courses and better communication |
| v | Mix of products | Shift in product mix alters the basis of standard costs | Regularly revise standards to reflect actual mix |
| vi | Level of performance | Over-strict or over-liberal standards undermine cost control | Set attainable performance levels |
| vii | True value in exchange | Standard costs may not reflect real exchange value | Standards are grounded in economic/technical factors — they are realistic sacrifices |
| viii | Costly fixation | Setting standards is expensive, especially for small firms | Benefits of effective cost control outweigh the setup cost |
### Key Insight
Every criticism has a counterargument. Standard costing is not abandoned because of these criticisms — instead, the system is refined. In exam answers, always pair each criticism with its mitigation.