What is a common drawback of standard costing?

Standard costing is a technique used to establish expected costs for production processes, which can help in budgeting and performance evaluation. However, a common drawback of this method is that it can quickly become outdated and mislead management regarding current operating conditions and performance.

As market conditions, production processes, and resource costs change, the standards may no longer reflect the actual costs incurred. This disconnect can lead to incorrect decision-making, as management might rely on outdated standards that do not represent the current economic environment. Consequently, if a company adheres too rigidly to these standards without regularly updating them, it risks making choices based on inaccurate information, which can hinder operational efficiency and financial performance.

In contrast to the incorrect options, while standard costing does promote focus and set benchmarks, its main drawback is its potential for obsolescence, which affects management's ability to assess performance accurately and make informed decisions.