Write 7 pages thesis on the topic how does the system of standard costing work. This paper considers the other side or the side in which standard costing has found its inappropriateness and unsuitability. Furthermore, the outcome of the critical analysis of how standard costing works is also evaluated in terms of its effectiveness as a means of control in the global industry and the increase in consumer wealth. As a general idea, standard costing is a system of cost ascertainment and control in which predetermined and preset standard costs and income for products and operations are set. This standard costs and income for products and operations are periodically and from time to time compared with the actual costs incurred and income generated for the purpose of establishing any variances. Standard costing system is used by many organizations as a management tool in estimating the overall and general cost of production with the assumption of normal operations. While it has standard costing has been widely used by most production and manufacturing companies, the system has found its great importance and appropriate significance in most organizations and firms whose operations involved are common and repetitive. Standard costing generally involves the development of a product or service cost with the use of estimates of both the resources consumed as well as the prices of those resources. In producing a standard selling price, the standard cost may then be increased by an estimated profit margin. These estimates of cost and revenue then provide and build up a foundation for additional and supplementary planning and control (Mitchinson 2000 July 1). Traditionally, standard costing is often and frequently associated with manufacturing though it also can be used in another area like the service sector. In support to Drury’s (2004) claim that standard costing is appropriate and suitable in common or repetitive operation of an organization, Mitchinson (2000) asserted and alleged that the system, as a method, is essentially apt and fitting to the task which is repeated many times. To provide a rationale for this allegation, repeated tasks or operations give organizations and firms the means to estimate the nature of how tasks will be performed in the future and upcoming operation. The information gained previously in a repetitive operation can be used in predicting the income and expense for any period. The reported setbacks and inappropriateness of standard costing have been spotted in the part of lean companies. Baggaley (2003) strongly argues that the system’s measurements motivate and encourage behaviors that are harmful and inappropriate to lean environments. Additionally, standard costing does not provide reliable cost information for decision-making that is important in a lean situation. As a result, Baggaley (2003) suggested an alternative costing approach that goes in line with the goals of lean that also provides the basis for sound management decisions. There are problems with standard costing when used as a system of control in a lean environment that Baggaley (2003) has identified. The first predicament is the problem regarding the people and the workforce. Naturally, standard costing sets standard performance that causes people on the shop floor to do the wrong things when just to meet the present performance level.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more