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Standard costing: insights from leading companies Logo cima

  KPMG |   Free |   CIMA & KPMG |   2010 |   Thought leadership

This research by KPMG into standard costing illustrates the importance of ensuring the right information is both made available and used effectively. This provision of the most relevant management information and its proper use is part of a much wider issue of significance to business leaders and management accountants. The Walker Review which scrutinised corporate governance in the UK financial sector highlighted the need for non executive directors to be better informed and more engaged. But non executive directors can never be close enough to the business to be certain of their precise information needs, nor to influence management’s decision making at an operational level. This is because good governance at board level is a necessary but not a sufficient condition to ensure good performance and risk management. (PDF 329KB)

Topics covered:
  • Management accounting: Technical: Cost accounting & management: Cost accounting, Intermediate

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3 Comments/Reflections

John Walton

John Walton Feb 2020

My experience of Standard Costing is that identified variances, trends and on-going deviations from standard such as commodity price changes, changes in production efficiency caused by machine speed improvements, for example, are incorporated into updated standard costs each and every month. Overhead absorption rates are calculated quarterly and absorbed using the most relevant calculation of direct hours. So if direct to indirect conversion is deteriorating due to say high absenteeism or a need for ongoing training, then labour rates are updated accordingly. 
It is essential for accurate costing, pricing and stock valuation that standards are updated monthly. An annual update makes the standards meaningless.
Mark Tibbs

Mark Tibbs Dec 2019

Interesting on setting standards more than once a year. We stuck to changing standards annually, but after reading this there is a temptation to change standards maybe half year if we have another year of raising commodity costs and fluctuations in exchange rates as previous years
Mark Clenshaw

Mark Clenshaw Apr 2019

An interesting report on how to use and think about standard costing.  From my experience I have seen the issues with inconsistency globally which can impact decision making within the business.  I have also seen the distrust of the data provided and the time it can take to roll the standards.

I like the idea of the global council that can help to standardize plus some kind of shared service analysis to keep that consistency.  This gives me some ideas for my current company where it is extremely difficult to fully track costs to SKUs