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1、General standard costing1. outline the use of standard costing standard costing is useful where there is a significant degree of repetition in the production process. This is because the standard costs are averages. Valuation of inventories and costs of production for reporting purposes Provide an e
2、xcellent basis which enables costs to be monitored, reviewed and controlled by management Enable the exception reporting through the use of variance analysis to control costs with a lower degree of effort and less time Assisting in the budgeting process Establish a good basis to evaluate managerial
3、performance Motivation of staff by setting demanding and achievable standards attainable standards Improving efficiency. Standard setting is often viewed as a way of understanding the detail of objectives and processes. If standards are an accurate reflection of a process, then they can be used to h
4、ighlight ways of improving efficiency and act as signals when the process becomes inefficient. 【comparison corrective actions】 2. discuss the reasons why standars have to be reviewed once standards have been set, they cannot be assumed to be accurate over long periods of time. standards have to be r
5、eviewed to enable the benefits of standard costing to continue. For example, in environments which continuously seek greater efficiency and reduced costs of production, standards have to change to reflect such improvements. In a fast-moving environment, standards can very quickly become out of date.
6、 Moverover, other purposes of standards are undermined, if they are not continually reviewed: The motivational impact of standards Assessment of managerial performance Reporting procedures The credibility of standards in their role in assisting with the budget setting Budget and Standards: standards
7、 can be used in these budgets - Participation and imposed budgets; incremental budget; fixed budget; Rolling budget,ZBB and ABB have different kind of standards 3. examine the impact of the operational changes on the profitability of the company operational changes: improve the materials quality by
8、changing the suppliers; increase the selling price; introduce more skilled labour; significantly reduce fixed overheads by maximising achievement, staff may be motivated to perform better with an asipirations budget 【difficult but credible】 these changes may result in some adverse variances in short
9、-term. Managers should be better off assessing performance in long run. 4. discuss the types of standard used in standard costing and their effect on employee motivation the theory of motivation suggests that having a clearly defined target results in better performance . that targets need to be acc
10、epted by the staff involved and more demanding targets increase motivation provided they remain accepted basic standard: remains unchanged for a long period and is only used to show trends over time. it becomes increasingly easy to achieve. Be undemanding gradually, may have a negative impact on mot
11、ivation. Standards that easy to achieve will give employees little to aim at. ideal standard: represent the outcome that can be achieved under perfect operating conditions, with no inefficiencies at all. obviously, these conditions are unlikely to occur . ideal standards will be very demanding and a
12、re unlikely to be accepted as targets seem to be unachieved. Using it may have a negative effect on employee motivation. current standard : based on current operating conditions and incorporate current levels of wastage, inefficiencies and machine breakdown. There is no improvement beyond its curren
13、t level and their impact on motivation will be a netural one. attainable standard : can be achieved by taking account of some wastage, inefficieny and machine breakdown. They are likely to be more demanding and have a positive effect on employee motivation. Since they are improved but still can be a
14、chieved. Variances1. explain the possible reasons for inter-relationships between A and B, or A/B/C material price variance VS material usage variance material price variance VS labour efficiency variance material price variance VS material yield variance material mix variance VS material yield vari
15、ance material price variance VS sales volume variance selling price variance VS sales volume variance material usage variance VS labour efficiency variance labour rate variance VS labour efficiency variance labour efficiency variance VS variable overhead efficiency variance variable o/h expenditure
16、variance VS variable o/h efficiency variance sales volume variance VS fixed o/h 2. state possible causes of an adverse/favorable X variance errors in standard setting: ignorance of learning effect; inaccurate information for standard settting; wrong prediction; poor budgeting; whether it is a new product or not 【new product always may result in some adverse material usage variance and labour efficiency variance; 】 mat
