Standard Costing Limitations
Difficult to set up reliable standards:
It is difficult to set up reliable and workable standards. Unless the standards are correctly fixed, the control the study of variances will not be effective
Expensive :
Revision of standards in the light of changed circumstances, become expensive. If the standards are not revised they become out dated.’Such standards are not reliable
Difference between Marginal costing and Absorption Costing
High degree of technical skill :
establishment of standards may be costly and may require high degree of technical skill
Fixing responsibilities is a difficult task:
For fixing responsibilities for an adverse variance, the controllable and uncontrollable periods of the variances should be segregated. This is a difficult task.
Cost Accounting Basics : Historical Costing and Standard Costing
Adverse psychological effects:
Sometimes, standards create adverse psychological effects. If the standard is set a high level, its non-achievement will lead to frustration and resistance. This acts as a discourgement rather than an incentive for better efficiency.
Unsuitable :
Due to unsuitably for jobbing type of industry, fixation of standards for each job becomes difficult and expensive. Non suitable for small industries Inslallalion ofstandard costing is an expensive affair. Hence small business concerns do nol show much interest in installing standard costing