Process of setting standards in standard costing, Cost Accounting

Process of Setting Standards in Standard Costing

Establishing correct a standard is extremely important due to the accuracy of the standards usually finds out the success of the standard cost system. As we will look later, the standard cost system has extremely serious behavioral implications for the staff whose performance will be measured against the standards. The staff feels such the standards are too high, or unachievable, they will be frustrated and will be greatly de-motivated. If a disciplinary action is taken also on employees who fail to achieve the standards, however the worker feel that it is unfair like the standard was not accurate, this will bring to resentment, sabotage and de-motivation to the employees.On another hand, if the standards are too low, they will be simply achieved via employees and they will not be challenged to work hard.

In finding out standard cost, every cost should be carefully analyzed to ensure each factors affecting the cost level in the period the cots are to be utilized have been considered.  In addition, managers in charge of the departments responsible for meeting the standards must approve the bases for the standards. For the standard setting procedure and standards implementation to be successful, the employees responsible for meeting the standards must have the chance to participate in the Standard Setting Process.  They are the best positioned in pinpointing not any accuracies in the set standards. It is simple to enforce standards once their acceptance is solicited via participation in the setting process. The manager overseeing the setting of standards should contain an honest desire also to set achievable targets and to assist their employees lower and managers achieve them also. Also, standards should only be set after there has been interaction between all the individuals involved. Last, and very significant, the top management must fully help the standard costing process from Standards Setting to standards implementation. This help gives the standards the enforcement they require to be effected in the complete organization.

Posted Date: 2/7/2013 5:12:18 AM | Location : United States







Related Discussions:- Process of setting standards in standard costing, Assignment Help, Ask Question on Process of setting standards in standard costing, Get Answer, Expert's Help, Process of setting standards in standard costing Discussions

Write discussion on Process of setting standards in standard costing
Your posts are moderated
Related Questions
The following information is provided to you concerning Lydia Ltd as at 30 June 2012.  Assume a company tax rate of 30%. (i) The balance of rent received in advance in the balan

Material Usage Variance (MUV): This is the variation between the actual quantity of material consumed and standard quantity which should have been consumed, expressed in terms

Q. What are the advantages and disadvantages of free float? Advantages: It is one of the most suitable ER regimes for transitional countries that experience external shocks l

Budgeted direct labour cost 75000 hours @ $16 per hour Budgeted manufacturing overhead 80 000 hours @ $17.50 per hour Actual direct labour cost $997 500 Budgeted manufa

Xander Harris is considering whether to buy a corn and soybean farm in Iowa. The farm will cost $800,000, and Xander will be able to pay this from profits his recently deceased mot

contract account formate


Cost Accounting advantage and features

Vintage Auto Company manufactures parts to order for antique cars. Vintage Auto makes everything from fenders to engine blocks. Each customer order is treated as a job. Vintage Aut

Dividends                                                                                        ................ Non-operating losses not passed through P and L A/c