STANDARD COSTING

Relevance of Standard Costing

Relevance of Standard Costing

Introduction

The dynamic process of planning and administrative control has demanded that techniques companies use every day are equally dynamic (Lucas 1997). As we know the control of costs is vital for any company that is dedicated to the manufacture of any product as this will help us to determine both the price of sale and the profit we want to get (Horngren, Datar & Rajan 2012). It should be stressed that bringing costs under control principles clearly identified is not exclusive to large companies, is also applicable to the business of small and medium-scale public and private, profitable or non-profit, since these principles can be adapted to the specific needs of each type of organization (Bonsack 1991). The primary purpose of cost control is to obtain a production of quality with the least possible expenditure to turn, offer the public the lowest price and thus be in a position to compete in the market and seek a balance between supply and demand of our products.

Also the accounting of costs is a tool that facilitates the management carrying out its core activities as those of planning, organization, direction and control for better decision making and effective organization of team work (Fleischman and Tyson 1998). The degree of participation of cost accounting in the company depends on it, in some cases, the cost department is dedicated solely to the compilation of product costs, in contrast to other established specialized team of accountants to provide all type of information related to the expenditure that is necessary to manufacture the product and the purpose or object they have for this (Horngren, Datar & Rajan 2012). In this paper we will focus on standard costs and their relevance, which have been adopted in many international companies because it is considered to be the result of work done with norms of efficiency at a minimum cost.

Discussion

Cost accounting refers to the process of measuring, analyzing, calculating and reporting on cost, performance and execution of operations (Marie 2010). E 1903, FW Taylor made the firsts in terms of research to achieve better control of the development and productivity, which inspired Mr. Harrington Emerson (1908) for further reading, which in turn inspired the counter Chester G Harrinson emerged in 1921 to the Technical Standard Cost Valuation, considering Emerson Harrinson the precursor and the director, whose first trial was made in the United States (1912) (Horngren, Datar & Rajan 2012).

The technique of standard costs is the most advanced existing deals as it serves as an instrument for measurement of efficiency, because its determination is based precisely on the work efficiency in the economic entity. For the use of standard costs can be two situations: one that sees the company as a high efficiency, when no down time are calculated and accepted peak performance of machinery, utopian situation, but with projected overcome. Another in which are considered certain cases of loss of time both in the use of human endeavor, and ...