Rayong factory of the Simple Shoes Company Essay

Rayong factory of the elemental Shoes Company - Essay ExampleA tell between base, ideal and attainable standards and explain how these may be utilize in the Rayong factory of the Simple Shoes Company. Standard woo is the pre-determined operating cost calculated from Managements standards of efficient deed and the relevant necessary expenditure. It is used as a basis for price fixation and cost go through variance analysis. staple fibreally, standard cost reflectsoQuantities of material and labor pass judgment to be usedoPrices expected to be paid for materials and labor during the coming year, and,oFactory expenses applicable to production based on efficient act and practical capacity operation of the factory.Standard costs are used in the following applicationso grooming & Control Standards provide a benchmark, which serves two purposes guiding and directing the activities of the firm (planning) and analyzing whether the actual activities are in proper direction ( break).o Pricing Decisions Standard cost facilitates decisions as also in decisions involving submission of quotations, replying to tenders etc. Since cost is pre-determined based on acceptable standards efficiency, decision making process is simplified.oVariance Analysis Identification and measurement of variances from standards is realizable with the use of standard costs, with a view to improve performance or to revise standards, whichever is applicable. Management by Exception By analyzing the variances, the decision maker can focus on significant deviations from standards and take disciplinal actions. Managers can concentrate on critical areas of activity where variances are reported. Thus, standard costs facilitate control by exception (Accounting Tools 2008). Characteristics of basic standards (AccountingCoach 2008) Particulars Characteristics Period These standards reflect the costs that would have been incurred in a current past period (i.e. the base period). Change These standar ds are used for items or costs which are apt(predicate) to remain constant over a long period. Short run vs. Long run introductory standards are set on a long term basis and are seldom revised. piece These costs relate to a base year, which is chosen for comparison purposes, like price indices etc. Basic standards do not represent what should be attained in the present period. Suitability Suited further to businesses having a small range of products and long production runs. Comparison of ideal standards and attainable standards (Accountingformanagemt.com 2009) Particulars Ideal Standards get-at-able Standards Conditions These represent the level of performance attainable with the best or ideal set-up, i.e. best quality materials at favorable prices, highly skilled labor, best equipments and layout. These represent the level of performance attainable under conventionality operating conditions, i.e. normal efficiency, normal sales/production volume etc. Efficiency These standar ds focus on maximum efficiency in utilization of resources, i.e. maximum output with minimum cost These standards focus on the practical attainable efficiency, after considering normal imperfections, i.e. optimization (not minimization) of cost per unit. Attainment These are generally not attainable hence such standards may not be taken seriously. These are attainable with probable effort and hence constitute a good benchmark for control. Disposition of variances Variances from the ideals would not indicate the uttermost to which they could have been reasonably and practically avoided. There is no logical method of disposing these variances. Here, variances are deviations from normal expectations. accordingly they are disposed on the basis of the policy of the company in this regard. How these may be used in the Rayong factory of the Simple Shoes Company As is obvious from what has been discussed above a basic standard is more of a historical piece of information without much pra ctical relevance for a new set up. Thus, it is advisable that no effort should be spent on setting up basic standards. Instead it would be much more effective if the