The company may also use standard cost technique for control purpose, they set standard for each activity and then multiply that standard rate with actual activity carried on to compare with actual cost in dollars incurred. For example, the standard cost to produce one unit is $20 per unit and the company produces 5000 units, the standard cost allowed for actual production is $100000, then it should be compared with the actual cost incurred, it the cost incurred is $90000, it means the company has saved $10000 and if it is $105000, it shows overspending of…
After doing a thorough review of your current costing system and other costing systems as well, JBJ consulting, Inc. has concluded that standard costing is the best costing system for your company when used correctly. We have identified a few problems with your standard costing system that we would like to address.…
Fisher, J. G., and K. Krumwiede. 2012. Product costing systems: Finding the right approach. Journal of…
To establish the standard cost of producing a product, it is necessary to establish standards for each manufacturing cost element—…
Product cost is an important indicator of a comprehensive reflection of enterprise production and business activities. Correct costing, Bates can assess the cost of production and operation expenditure levels, and determine the basis for the company's profits and losses as well as on the development of product prices. And for enterprises conduct business decisions providing important…
This paper aims to critically analyse the use of standard costing as a control technique in a new era. Firstly, standard costing will be examined so as to understand its application in the business world. Secondly, arguments from various researchers will be presented, which support and criticized the use the standard costing. Finally, these arguments will be weighed, so as to draw conclusions as to…
The current cost accounting system is consistent with traditional costing system required for external financial reporting. Traditional costing is attractive to financial reporting because it better matches costs with revenues. All manufacturing costs are assigned to products in order to properly match the costs of producing units of product with their revenues when they are sold. Financial reporting standards explicitly require companies to use traditional costing for external reporting purposes.…
Adopting a standard costing system helps identify performance standards and also helps a company’s managers in preparing budgets and setting performance target levels. In this case, the company needed to find out if the new material it was using was providing any benefits. These favorable variances indicate that the quality of this new material did not have any detrimental effects on production…
Standard costing is a technique, which uses standards for cost and revenue for the purpose of control through variance analysis. We can say standard costing is a technique of costing, which also established control over costing.…
4. Analyze problems pertaining to cost variances and standards used by management in controlling costs in manufacturing…
Standard costs, flexible budgeting, and variance analysis--all are vital components of an effective cost accounting system. Standard Costs are predetermined costs that are usually expressed on a per-unit basis; they are target costs, costs that should be attained. One can think of a standard as a budget for a single unit. Standard costs are the building blocks of a flexible budgeting and feedback system (the comparison of actual performance with planned performance).…
The major can be remarked as cost-plus contracts and driving of inappropriate activities. It is due to the aspect that there are varied variances under the concept of standard costing system which tends to drive management to make inappropriate decisions to develop favourable variances. In the similar aspect, it can be remarked efficiently that standard costing principles demonstrated that costs does not change in the upcoming future, so that firm can significantly depend upon the standards for varied months or years. However, in a particular environment in which product tends to live shortly or continuous improvement is needed, standarised costing principles reflects to become out of scope within number of months. In the similar context, in manufacturing departments where individuals are more focused on attaining immediate feedbacks of differentiated problems for the purpose of urgent correction. In the particular context, the reporting for the specific variances represents to be highly late to be effectively…
The study presented four analyzes to discuss the criticisms of Standard Costing System and suggested redesigns for traditional SCSs. Authors mentioned the advantages and disadvantages of SCS, and then separately illustrated updates for variances from the aspects of raw materials, inventories, production levels and quality, and sales analysis. After that, this article illustrated several updates for improving SCSs in the form of redesigned variances, suggestions for dynamic standards, and refocused responsibility and reporting systems. In the final portion of the case, the author explained the relationship between the Standard Cost Systems and Activity Based Costing.…
The activity-based costing (ABC), Just-in-Time (JIT), the balanced scorecard, and target costing methods appeared and used wide, it leads to confusion about the sense of relevant of standard cost. Besides, standard costing and variance analysis had become disconnected from actual practices at the industry level.…
Standard costing values its manufactured products with a predetermined materials cost, a predetermined direct labor cost, and a predetermined manufacturing overhead cost. These standard costs will be used for valuing the manufacturer’s cost of goods sold and inventories. If the actual costs vary only slightly from the standard costs, the resulting variances will be assigned to the cost of goods sold. If the variances are significant, they should be prorated to the cost of goods sold and to the inventories.…