Research Paper (undergraduate) from the year 2011 in the subject
Business economics - Accounting and Taxes, grade: 63%, University of
Sunderland, course: Management Accounting and Control, language:
English, abstract: This report is divided into two parts. The first part
will explain how a standard costing system works and how a variance
analysis is used properly. Furthermore, the statement "Standard Costing
and Variance Analysis are appropriate to any type and size of
organisation" will be critically evaluated. The second part determines
factors, which must be considered in the decision-making process. In
addition, four scenarios of decisions will be provided and analysed. One
of the main objectives of an organisation is to minimise the cost of
production and to control the costs as they are limited resources within
a business (Gupta, 2010). Management accounting literature provides
several tools in order to achieve these objectives. In this context, the
system for collecting and reporting revenue and cost information by
areas of responsibility is called responsibility accounting (Siegel &
Shim, 2006). It is based on the assumption that managers should be held
responsible for their performance. A well-designed responsibility
accounting system integrates responsibility centers within the
organisation. In addition, responsibility centers are units within the
organization, which have control over costs and revenues (Siegel & Shim,
2006). There are different types of responsibility centers such as
profit centers, investment centers, revenue centers and cost centers. In
the following report, the focus is on cost centers. Here, a variance
analysis based on standard costing is a performance measure of a cost
center (Siegel & Shim, 2006). In addition, a standard costing system is
a useful tool facilitating decision-making.
