Standard Costing and Variance analysis

Topics: Cost accounting, Cost, Variance Pages: 25 (986 words) Published: June 9, 2015
IS STANDARD
COSTING OBSOLETE?

Department of Accountancy
University of Kelaniya

What is Standard costing?
Standard costing is technique which

establishes predetermined estimates of the costs
of products and services and then compares
these predetermined costs with actual costs as
they are incurred.

Management Accounting

2

What is Variance?
The difference between a cost's actual amount and its
budgeted or planned amount
Unfavorable cost variance

Actual cost > Budgeted Amount
Favorable cost variance

Actual cost < Budgeted Amount
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RESEARCH ARTICLE
Purpose:- This study aims to provide evidence on the extent
to which companies in Malaysia use standard costing. It also examines the differences in the use of such techniques
between local Malaysian firms and Japanese affiliates
Methodology:-From the industrial and consumer products
sectors listed on the Kuala Lumpur Stock Exchange and 21
Japanese affiliates in Malaysia, 66 companies were surveyed. Keywords:-Standard costs, Management Accounting, Cost
reduction, Budgets
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PROBLEM OF THE RESEARCH
Many authors have predicted that,
Shorter product life cycles
Advanced manufacturing technologies
Decreasing emphasis on labour in the production process
Global competition

May lead to the demise of standard costing.

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VARIABLES
1.

Use of standard costing

2.

Views on the various functions of standard costing

3.

lists various methods of setting labour and materials
standards followed by the type of standards that they
practice

4.

frequency with which standards are reviewed

5.

Respondents the method used to determine whether or not
a particular variance should be investigated

6.

Respondents to indicate the importance of particular
variances such as material usage, material price, material
mix and various other variances, for control purpose

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PREVIOUS RESEARCHES FINDINGS
The

survey is conducted in New Zealand and United
kingdom.

It has been found that standard costing systems

continue to be popular and that the majority of
accountants surveyed do not envisage abandonment of
standard costing and variance analysis in advanced
manufacturing technology environments.
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DESIGN / METHODOLOGY/
APPROACH
Survey
 Survey methodology studies the sampling of individual

units from a population.
 From the industrial and consumer products sectors listed

on the Kuala Lumpur Stock Exchange and 21 Japanese
affiliates in Malaysia, 66 companies were surveyed.
 survey data collection techniques is questionnaire

contructed.
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DESIGN / METHODOLOGY/
APPROACH.
Questionnaire
The section on standard costing consists of six questions,
1.

Whether or not respondents use standard costing?

2.

Views on the various functions of standard costing?

3.

lists various methods of setting labour and materials standards followed by the type of standards that they practice

4.

frequency with which standards are reviewed

5.

Respondents the method used to determine whether or not a
particular variance should be investigated

6.

Respondents to indicate the importance of particular variances

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RESULT OF THE ANALYSIS
1.0 Demographics and test for non- response bias
Company characteristics

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RESULT OF THE ANALYSIS CONT.
Company characteristics (net assets)

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RESULT OF THE ANALYSIS CONT.
Company characteristics (no. of employees )

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RESULT OF THE ANALYSIS CONT.
2.0 Use of standard costing
Extent standard costing is used by company

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RESULT OF THE ANALYSIS CONT.
3.0 Importance of standard costing
 It has been claimed that the use of...
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