Question

Suppose a company is implementing lean accounting throughout the organization. Why might standard costing NOT be beneficial for that company?

Describe at least four ways a company could use standard costing and variance analysis?

-Answer has to be open-ended to discussion.

Answer 1

Lean accounting refers to doing what is required. It deals with becoming more and more efficient and reducing wastage of the product. Lean accounting also works on how to cut down the time, cost as to save the organisation allover control system.

We all know that we cannot apply two methods simultaneously. As said in the question lean accounting is being followed by the organisation, and if we then apply standard costing, then all the benifit we recieve from lean accounting would go vanished. For example if lean accounting is applied the inventory is lowered and if we follow standard accounting, it appears that profits of a firm have gone down due to low inventory valuation.

Ways a company could use standard costing and variance analysis are as follows :-

1. Cost control :- the key of standard and variance costing is to save the firm from the unnecessary costs.

2. Effectively and efficient work :- On time and less cost and effort are principles of standard costing. Hence, brings efficiency in the firm.

3. Standard and variance costing deals with results oriented behaviour that is different from expected figures.