Management and Standard Costs
The issue we identified as the most important aspect of the chapter was the benefits associated with budgetary planning. There are numerous benefits, the first of which is the requirement for all levels of management to plan ahead with defined goals. The next benefit Is that these goals or objectives provide a method for evaluating the performance of management while also providing an early warning system to warn of budgetary issues. It also assists the company in coordinating its activities to defined oils.
Another benefit is it results in greater management awareness of overall operations and how it is being impacted by outside factors. The last benefit is the motivation that it provides for all personnel to reach the goals assigned by the company (Keel, Wesleyan and Keels, 2011). Each of these benefits provides direction for the company to be successful. Knowing the benefits of budgetary planning will benefit us in our future careers. We can use this knowledge to help motivate our subordinates by including them in the process.
Spreading knowledge bout the company’s goals, budget restrictions, and overall health will motivate all employees to strive for better performance. Also having this knowledge will benefit us by providing guidance on our
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Standards and budgets are essentially the same, both are predetermined costs and both contribute to management planning and control. A standard is a unit mount. A budget is a total amount (Skimmed, Wesleyan and Keels, 2011 Standard costs offer the following advantages to an organization: facilitate management planning, make employees more “cost conscious”, useful in setting selling prices, contribute to management control by providing a basis for the evaluation of cost control, highlight variances in management by exception, simplify the costing of inventories and reduce clerical costs.
Setting standards requires Input from all people who have responsibility for costs and quantities, Ideal standards represent optimum levels of performance under reference that are attainable under expected operating conditions. Variances are the differences between total actual costs and total standard costs. The causes may relate to both internal and external factors (Skimmed, Wesleyan and Skies, 2011).
The balanced scorecard incorporates financial and nonofficial measures in an integrated system that links performance measurement and a company’s strategic goals. It uses four perspectives: financial, customer, internal processes, and learning and growth. Objectives are set within each of these perspectives that link to objectives within the other prospective.