Standard Costing Still Relevant

Topics: Cost accounting, Variance, Balanced scorecard Pages: 2 (313 words) Published: November 10, 2013
Is Standard Costing Still Relevant?
Motivation
The activity-based costing (ABC), Just-in-Time (JIT), the balanced scorecard, and target costing methods appeared and used wide, it leads to confusion about the sense of relevant of standard cost. Besides, standard costing and variance analysis had become disconnected from actual practices at the industry level. Research question

In this case, author solved four questions:
1. Is standard costing used in Dubai?
2. How important are various functions in standard costing? 3. How frequently are various techniques and cost standards used in standard costing? 4. How important is the analysis of variance for control purposes? Research design

They collected the data from a survey questionnaire that had a reasonably good response rate and chose the companies randomly, covering all subcomponents of the industrial sector and the service and trading (retail) sector. At the same time, they design the research based on the four questions: 1. Accounting and finance professionals in Dubai for the first question. 2. The techniques include design/engineering studies, observations based on trial runs, work/study techniques, and average historic usage. The author used average performance standards and average historic usage. 3. About the frequently, including monthly, quarterly, semiannually, annually, continuously. 5. The method based on managerial judgment, a calculated variance exceeding a specific monetary amount or a given percentage of standards, or through the use of control charts. 6. Materials prices and sales prices for control purpose after analysis the variances. Result

1. Seventy-seven percent of the companies in Dubai’s industrial sector use standard costing compared to 39% in the service sector. 2. Companies probably will continue to be attracted to standard costing and variance analysis, regardless of their size, geo- graphical location, and sector. 3. Companies use two or more cost accounting methods to...
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