Kristina, a senior accountant in Smooth Sailing Corporation, has heard it all before. Managers and employees alike often complain:
“Why are we using standard costing when our market and processes are constantly moving?”
“When are they going to update those standards? It’s the twenty-first century!”
“I don’t even look at the standards anymore. They’re useless!”
On the surface, these arguments are compelling. But Kristina knows that these issues can be overcome, especially when managers understand why and when standards require updating. For example, changing input prices, evolving market factors, and internal factors such as production process changes can all drive the need to update standards. Of course, the process for updating standards is not always as simple as recognizing the need to make updates. Many factors influence standards updating, including how the standard costing system is utilized to manage the business, whether it be for budget planning, cost control performance evaluation, quality control, or some combination of these.
The use of the standard costing system itself has implications for employees’ motivation and performance. For example, when deciding how to update standards, Kristina must address the issue of employee involvement in this process. Though employees are often closer to day-to-day operations, when standards are used for performance evaluation, there can be conflicting motivations. In the end, Kristina has to decide if the advantages of involving employees in participative budgeting outweigh the drawbacks.
There are also different techniques available to Kristina as she determines the best value for the updated standard. Though some methods may provide more accuracy, that accuracy has to be balanced against the increased complexity and time needed for such methods.
Do your company’s standards make you feel as if you are lagging behind your competitors? The Accenture Academy course Updating Standard Costs to Improve Performance uses a real-world, case-based scenario to help you recognize when and why standard costs should be updated and to identify the employees’ role in this process. Further, you will identify helpful techniques for determining the right standards for your company. From these applications, you should be able to help your company more effectively use standard costing to improve profits and performance.
Accenture Academy offers proven, cost-effective learning solutions for a more versatile workforce and a more agile organization. We provide a flexible learning approach that helps your people be more versatile and your entire organization be more agile in the marketplace. Curriculum includes Supply Chain Management, Finance, Procurement, Analytics, Leadership & Management and Specialty Skills.