Analysis of Standard Costing System and Decision Making Essay Example
Content
1. Introduction 4
2. Part Ⅰ--Standard Costing System and Variance Analysis 5
2.1. Definition 5
2.2. Scenarios of Standard Costing System and Variance Analysis 5
2.2.1 Scenario Ⅰ Manufacturing Companies—Auto-making Firms 6
2.2.2 Scenario Ⅱ Service Industries—Banks 7
2.2.3 Scenario Ⅲ Other Industries That Have not Repetitve Processes—AdvertisingFirms 8
2.3. Standard Costing System on Different SIzes 9
2.4. Variance Analysis 9
2.4.1 Total Production Cost Variance 9
2.4.2 Marterials Variances 10
2.4.3 Fixed overhead Variance 11
2.5. Summary 12
3. Part Ⅱ—Relevant and Irrelevant Costs and Incomes 13
3.1. Definition 13
3.2. Scenario Ⅰ—Shutting Down or Keeping Open Part of the Business 13
3.2.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅰ 16
3.2.2 Qualitative Factors in Scenario Ⅰ 16
3.3. Scenario Ⅱ—Pricing Products or Services 16
3.3.1 Pricing Customized Produccts/Services 17
3.3.2 Pricing Non-customized Products/Services 17
3.3.3 Relevant and Irrelevant Costs andIncomes in Scenario Ⅱ 18
3.3.4 Qualitative Factors in Scenario Ⅱ 19
3.4. Scenario Ⅲ—Product Mix and Limiting Factor Analysis 19
3.4.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅲ 21
3.4.2 Qualitative Factors in Scenario Ⅲ 21
3.5. Scenario Ⅳ—Make or Buy Decisions 21
3.5.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅳ 24
3.5.2 Qualitative Factors in Scenario Ⅳ 24
4. Conclusion 25
Reference 26
Appendix 28
I. The Learning-Curve Effect 28
II. Variance Analysis for A Variable Costing System 28
III. Formula for Variance Analysis 29
8
1. Introduction
With more and more competitive in global market, costs of companies’ products become more and more important. In this assignment, the definitions of standard costing and variance analysis are introduced. This assignment refers that whether or not standard costing system and variance analysis are appropriate to any type and size of organization, and analyzes four
1. Introduction 4
2. Part Ⅰ--Standard Costing System and Variance Analysis 5
2.1. Definition 5
2.2. Scenarios of Standard Costing System and Variance Analysis 5
2.2.1 Scenario Ⅰ Manufacturing Companies—Auto-making Firms 6
2.2.2 Scenario Ⅱ Service Industries—Banks 7
2.2.3 Scenario Ⅲ Other Industries That Have not Repetitve Processes—AdvertisingFirms 8
2.3. Standard Costing System on Different SIzes 9
2.4. Variance Analysis 9
2.4.1 Total Production Cost Variance 9
2.4.2 Marterials Variances 10
2.4.3 Fixed overhead Variance 11
2.5. Summary 12
3. Part Ⅱ—Relevant and Irrelevant Costs and Incomes 13
3.1. Definition 13
3.2. Scenario Ⅰ—Shutting Down or Keeping Open Part of the Business 13
3.2.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅰ 16
3.2.2 Qualitative Factors in Scenario Ⅰ 16
3.3. Scenario Ⅱ—Pricing Products or Services 16
3.3.1 Pricing Customized Produccts/Services 17
3.3.2 Pricing Non-customized Products/Services 17
3.3.3 Relevant and Irrelevant Costs andIncomes in Scenario Ⅱ 18
3.3.4 Qualitative Factors in Scenario Ⅱ 19
3.4. Scenario Ⅲ—Product Mix and Limiting Factor Analysis 19
3.4.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅲ 21
3.4.2 Qualitative Factors in Scenario Ⅲ 21
3.5. Scenario Ⅳ—Make or Buy Decisions 21
3.5.1 Relevant and Irrelevant Costs andIncomes in Scenario Ⅳ 24
3.5.2 Qualitative Factors in Scenario Ⅳ 24
4. Conclusion 25
Reference 26
Appendix 28
I. The Learning-Curve Effect 28
II. Variance Analysis for A Variable Costing System 28
III. Formula for Variance Analysis 29
8
1. Introduction
With more and more competitive in global market, costs of companies’ products become more and more important. In this assignment, the definitions of standard costing and variance analysis are introduced. This assignment refers that whether or not standard costing system and variance analysis are appropriate to any type and size of organization, and analyzes four