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Inappropriate standards (or targets):
This is a problem arising from deficiencies in planning. If not enough time and resources are devoted to setting accurate standards in the first place, and if they are not kept up to-date, subsequent performance is highly likely to deviate from what was expected.
Mis-measurement of actual results: Scales may be misread, the pilfering of wastage or materials may go unrecorded, items may be wrongly classified (as material X3 say, when material X8 was used in reality), or employees may make ‘cosmetic’ adjustments to their records to make their own performance look better than it really was.
Implementation breakdown:
This means that for a variety of causes employees will not always implement the plan in the way that was intended. The classic example is the purchase of raw materials at a lower than budgeted price, causing quality problems for production. Such problems may arise whether employees act with the best intentions or whether they deliberately take their own course because they do not agree with the plan. They may also be caused by poor communications or inadequate training.
prepare all budgets
Explain what is meant by traditional costing system. Support with example.
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