As more manufacturers move to Toyota-style Lean management, some CFOs are asking a controversial question: Is it time to move away from standard costing
and variance analysis (SCVA)?
It covers financial record keeping, income statements, the balance sheet, checking the double-entry system, accounting for various types of business organizations, business and standard costing
, marginal costing and decision making, budgeting, working capital management, capital investment appraisal, limited companies and published accounts, accounting standards, statement of cash flows, and accounting ratios.
This activity can be done within a problem structure format for several topics, but the focus for this paper is on standard costing
variance analysis, a sometimes difficult topic for principles of accounting students.
Added functionality for drop ship, standard costing
, general ledger, and increased ACH handling enhancements were satisfied in this release.
The application of standard costing
methods is a core area of the syllabus in which P1 candidates should be highly prepared.
Do mature lean manufacturers continue to use standard costing
and variance analysis?
The study revealed that standard costing
systems are still the most popular, especially in the production function of the internal value chain (42 per cent use standard costing
compared to only 18 per cent for ABC).
In this way, standard costing
"winds up creating a problem [by] giving off a signal that our costs are actually lower than they appear on the profit and loss statement," Medley said.
The final section covers traditional managerial accounting topics of classifying costs, job order costing, direct and absorption costing, and standard costing
Overhead is still allocated based on direct labor (often requiring overhead rates of 600% or more because direct labor is so low); standard costing
systems are still used to establish prices; complex systems are still used to value inventory; and financial accounting is still used to measure and monitor operations.
Traditional histories of cost accounting, such as Littleton , Solomons , Garner , and Wells , among others, have supported standard costing
specifically as a key component of what Solomons [1952, p.
And standard costing
compares predicted against actual costs to identify areas that vary significantly from the forecasted costs of performing a task.