The usefulness of standard costing has been challenged in recent years. Some claim that its use is an impediment to the objective of continuous improvement (an objective that many feel is vital in today's competitive environment). Write a short paper that analyzes the role and value of standard costing in today's manufacturing environment. Address the following questions:
1. What are the major criticisms of standard costing?
2. Will standard costing disappear, or is there still a role for it? If so, what is the role?
3. Given the criticisms, can you explain why its use continues to be so prevalent? Will this use eventually change?
4. What are some suggestions for redesigning the standard cost systems so that they are more relevant for advanced manufacturers?
5. How compatible are ABC and standard costing?
6. If standard costing is no longer completely suitable for some manufacturing environments, what control approaches are being used to supplement (replace?) the functional-based control model?
In preparing your paper, the following references may be useful; however, do not restrict your literature search to these references. They are simply to help you get started.
1. Mike Lucas, "Standard Costing and Its Role in Today's Manufacturing Environ- ment," Management Accounting (London, April 1997): pp. 32-34.
2. Carole B. Cheatham and Leo R. Cheatham, "Redesigning Cost Systems: Is Standard Costing Obsolete?" Accounting Horizons (December 1996): pp. 23-31.
3. Robin Cooper and Robert S. Kaplan, "Activity-Based Systems: Measuring the Costs of Resource Usage," Accounting Horizons (September 1992): pp. 1-13.
4. Bruce R. Gaumnitz and Felix P. Kollaritsch, "Manufacturing Variances: Current Practice and Trends," Journal of Cost Management (Spring 1991): pp. 58-64.
5. Robert S. Kaplan, "Limitations of Cost Accounting in Advanced Manufacturing Environments," in Measures for Manufacturing Excellence, ed. Robert S. Kaplan (Boston: Harvard Business School Press, 1990).
6. Mehmet C. Kocakulah and Brian D. Crowe, "Utilizing Activity-Based Costing (ABC) to Measure Loan Portfolio Profitability in a Community Bank," Cost Management (July/August 2005): pp. 40-47.
7. Robert S. Kaplan and Steven R. Anderson, "Time-Driven Activity-Based Costing," Harvard Business Review (November 2004): pp. 1-8.