Standard Costing (2) Flashcards
Impact of ideal on behaviour?
Incentive to be seen as more efficient or may feel that goals are unattainable
Impact of attainable on behaviour?
Provide a realistic by challenging target of efficiency
Impact of current on behaviour?
Will not motivate employees to do anything more than they are currently doing
Impact of basic on behaviour?
Less motivation from employees as they are easily able to achieve the standard
Similarities of standards and budgets (motivation)
Their impacts on employees’ motivation
Similarities of standards and budgets (budget)
Standards generally form the basis for the budget
Similarities of standards and budgets (control)
Both used for control
Differences between standards and budgets (unit)
Standards: By unit
Budgets: In total
Differences between standards and budgets (areas)
Standards: For areas of repetition
Budgets: All areas
Differences between standards and budgets (targets)
Standards: Financial and non-financial targets
Budgets: Financial targets
Is standard costing becoming less relevant?
Yes, in modern environment as previously when manufacturing was mainly of standard, mass produced products
Where does standard costing work best?
In a stable environment, modern environment is rapidly changing
Criticism of standard costing (revisions)
Regular revisions to the standard are required, Process expensive and time consuming
Criticism of standard costing (further improvements)
Meeting the standard should not necessarily be accepted as satisfactory if further improvements can be made
Criticism of standard costing (customised products)
Techniques associated with standard costing are less useful in a modern envirnoment of customised products
How should standards be reviewed and revised?
Should be reviewed regularly and revised when there is a change in basis upon which they were set
How should flexed budgets be used to show?
What cost and revenues should have been for the actual level of activity
What do budgetary control involves?
Drawing up budgets for the areas of responsibity for individual managers and regularly comparing actual results against expected results
Where are individual managers held responsible?
For investigating differences between budgeted and actual results, and are then expected to take corrective action or amend the plan in the light of actual events
