Essay On How Can A Standard Cost Accumulation System Benefit A Company

10.7 How can a standard cost accumulation system benefit a company?

Cost accumulation is a system in which costs associated with particular customer, job, batch, order, department and process are identified and accumulated. The basic benefit a company can obtain from cost accumulation system is that it gives accurate costing results. However a company can simplify job costing reports where multiple jobs, processes and operations are in place. The cost accumulation system may benefits the company in following ways:

1. A company may benefit from cost accumulation system by using a job order costing system, a system in which all costs are accumulated and pooled under job. It gives more accurate costing report related to that job.

2. The second

The price standards for materials should be formulated on the purchasing department’s best expertise and best estimates of the cost related to raw materials and an amount for related costs, similarly the direct materials quantity standard should also be based on requirements set for specific production but also provisions for unavoidable waste, pilferages and normal spoilage should be taken into account.

10.9 Discuss the importance of efficiency experts.

Efficiency expert is a person devises the methods and procedures to increase the efficiency of business units, production process. Efficiency experts provide wide variety of important activities to organization in order to achieve its management objectives, the efficiency experts are important to any organization in following manners:

1. They are trained people who can device a system designed to improve and increase the overall productivity or business

2. They help in fulfilling the ways to run process, operations and business more efficiently

3. They monitor and review the information related to process, and then based on evaluation and analysis they help in solving

Variance can be favorable and un-favorable, under costs variance if actual figures exceeds the standard figures it is called un-favorable variance, while if actual figures become smaller than standard it is called favorable variance. In the case of revenues if the actual surpasses the standard, it becomes favorable in the event where actual numbers are smaller than standard those are called un-favorable variance.

Importance of Variance Analysis

1. Variance analysis is largely used by the management to ascertain the strengths and weaknesses of internal and external systems of an organization.

2. It does not only give the insight of system flaws but also gives strong indications where the management attention is required.

3. If monitored regularly and with detailed it gives strong indication of malpractice being conducted within the organization.

4. It helps greatly on the preparation of budgets and forecasts

5. Another importance of variance analysis is that it helps in comparing the performance of business units of the organization.

10.11 Differentiate between historical costs and standard