Managerial reporting of standard variance basics

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Reference no: EM13150992

A newly hired controller discovered unusual patterns concerning standard costs. She noticed that the first-quarter profits were poor and gradually got better through the fourth quarter with a spectacular performance exceeding its target profit for the year. Apparantly top management was aware of this abusive practice of rigging standards. The company policy is vague on when to report saved up favorable variances and using them to create a nice smooth pattern of growing profits.

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Question: Should this managerial reporting of standard variance practice be permitted to continue? If not why and what affects does this accounting practice have on the company and its investors?

Reference no: EM13150992

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