Chapter 10 today.Chapter 10: Standard Costs and the Balanced Scorecard.
Standard costs are benchmarks or norms for measuring performance. Common standards are quantity standards and cost/price standards. Often both standards are used by a single organization.
Deviations for standards are brought to the attentions of management.
Price standards are typically the final, delivered cost of the goods. Quantity standards reflect the materials used, wasted, and spoiled per unit of finished product.
Standard costs are frequently used in generating budgets, but standard costs and budgets are not the same thing.
Variance analysis is used to evaluate performance. Price variance is determined as the difference between the actual price charged for the materials purchased and the standard price for that many units. Quantity is the difference between the actual quantity used for the units produced and the standard quantity for those units.
The balanced scorecard is an integrated set of performance measures that are derived from and support the company’s strategy as an organization. A balanced scorecard’s measures should be linked together, such that improvement in one area helps the other areas improved.
The length of time from order to delivery is referred to as the Delivery Cycle Time. The amount of time needed to turn raw materials into a shipping finished product is the throughput time.