MANAGEMENT ACCOUNTING REPORTS FOR PRODUCERS/INDUSTRIAL COOPERATIVES (Written Report of Group 2

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UNIT III. Cost Control (Variable, Fixed, Standard Costs) and Performance Evaluation Mary Angelique T. Belaos COST CONTROL  The process or activity on controlling costs associated with an activity, process, or company.  Cost control typically includes:  (1) investigative procedures to detect variance of actual costs from budgeted costs,  (2) diagnostic procedures to ascertain the cause(s) of variance, and  (3) corrective procedures to effect realignment between actual and budgeted costs. PRINCIPLES OF COST CONTROL A. INTRODUCTION Cost is important to all industry. Costs can be divided into two general classes; absolute costs and relative costs. Absolute cost measures the loss in value of assets. Relative cost involves a comparison between the chosen course of action and the course of action that was rejected. This cost of the alternative action - the action not taken - is often called the "opportunity cost". B. Basic Classification of Costs  Costs are divided into two types: variable costs and fixed costs.  Variable costs vary per unit of production. For example, they may be the cost per cubic meter of wood yarded, per cubic meter of dirt excavated, etc.  Fixed costs, on the other hand, are incurred only once and as additional units of production are produced, the unit costs fall. Examples of fixed costs would be equipment move-in costs and road access costs. Variable Cost  A corporate expense that varies with production output.  Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases.  Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the same regardless of production output.

 Fixed costs and variable costs comprise total cost.  Variable costs can include direct material costs or direct labor costs necessary to complete a certain project. For example, a company may have variable costs associated with the packaging of one of its products. As the company moves more of this product, the costs for packaging will increase. Conversely, when fewer of these products are sold the costs for packaging will consequently decrease. Fixed Cost  A cost that does not change with an increase or decrease in the amount of goods or services produced.  Fixed costs are expenses that have to be paid by a company, independent of any business activity.  It is one of the two components of the total cost of a good or service, along with variable cost.  An example of a fixed cost would be a company's lease on a building. If a company has to pay $10,000 each month to cover the cost of the lease but does not manufacture anything during the month, the lease payment is still due in full.  In economics, a business can achieve economies of scale when it produces enough goods to spread fixed costs. For example, the P100,000 lease spread out over 100,000 widgets means that each widget carries with it P1 in fixed costs. If the company produces 200,000 widgets, the fixed cost per unit drops to 50 cents. C. Total Cost and Unit-Cost Formulas  As harvesting operations become more complicated and involve both fixed and variable costs, there usually is more than one way to accomplish a given task.  It may be possible to change the quantity of one or both types of cost, and thus to arrive at a minimum total cost.  Total cost = fixed cost + variable cost × output  In symbols using the first letters of the cost elements and N for the output or number of units of production, these simple formulas are:  C = F + NV  UC = F/N + V D. Breakeven Analysis  A breakeven analysis determines the point at which one method becomes superior to another method of accomplishing some task or objective.  Breakeven analysis is a common and important part of cost control.

Example:  One illustration of a breakeven analysis would be to compare two methods of road construction for a road that involves a limited amount of cut-and-fill earthwork. It would be possible to do the earthwork by hand or by bulldozer. If the manual method were adopted, the fixed costs would be low or non-existent. Payment would be done on a daily basis and would call for direct supervision by a foreman. The cost would be calculated by estimating the time required and multiplying this time by the average wages of the men employed. The men could also be paid on a piecework basis.  Alternatively, this work could be done by a bulldozer which would have to be moved in from another site. Let us assume that the cost of the hand labor would be $0.60 per cubic meter and the bulldozer would cost $0.40 per cubic meter and would require $100 to move in from another site.  The move-in cost for the bulldozer is a fixed cost, and is independent of the quantity of the earthwork handled. If the bulldozer is used, no economy will result unless the amount of earthwork is sufficient to carry the fixed cost plus the direct cost of the bulldozer operation. Breakeven Example for Excavation.

If variable cost per unit output is constant, then the total cost for any number of units of production will be the sum of the fixed cost and the variable cost multiplied by the number of units of production, or F + NV. If the cost data for two processes or methods, one of which has a higher variable cost, but lower fixed cost than the other are plotted on the same graph, the total cost lines will intersect at some point.

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At this point the levels of production and total cost are the same. This point is known as the "breakeven" point, since at this level one method is as economical as the other. Referring to the figure, the breakeven point at which quantity the bulldozer alternative and the manual labor alternative become equal is at 500 cubic meters.

 We could have found this same result algebraically by writing F + NV = F' + NV' where F and V are the fixed and variable costs for the manual method, and F' and V' are the corresponding values for the bulldozer method.  Since all values are known except N, we can solve for N using the formula: N = (F' - F) / (V - V') E. Minimum Cost Analyses  A similar, but different problem is the determination of the point of minimum total cost. Instead of balancing two methods with different fixed and variable costs, the aim is to bring the sum of two costs to a minimum. We will assume a clearing crew of 20 men is clearing road right-of-way and the following facts are available: Example: 1. Men are paid at the rate of P0.40 per hour. 2. Time is measured from the time of leaving camp to the time of return. 3. Total walking time per man is increasing at the rate of 15 minutes per day. 4. The cost to move the camp is P50.  If the camp is moved each day, no time is lost walking, but the camp cost is P50 per day. If the camp is not moved, on the second day 15 crew-minutes are lost or P2.00. On the third day, the total walking time has increased 30 minutes, the fourth day, 45 minutes, and so on.  How often should the camp be moved assuming all other things are equal? We could derive an algebraic expression using the sum of an arithmetic series if we wanted to

solve this problem a number of times, but for demonstration purposes we can simply calculate the average total camp cost.  The average total camp cost is the sum of the average daily cost of walking time plus the average daily cost of moving camp. If we moved camp each day, then average daily cost of walking time would be zero and the cost of moving camp would be P50.00.  If we moved the camp every other day, the cost of walking time is P2.00 lost the second day, or an average of P1.00 per day. The average daily cost of moving camp is P50 divided by 2 or P25.00. The average total camp cost is then P26.00. Jonnabelle B. Mañacop Standard Cost An estimated or predetermined cost of performing an operation or producing a good or service under normal conditions. Used as target costs or basis for comparison with the actual costs. Advantages: Standard costing is a management control technique for every activity. It is not only useful for cost control purposes but is also helpful in production planning and policy formulation. It allows management by exception. In the light of various objectives of this system, some of the advantages of this tool are given below: Efficiency measurement – the comparison of actual costs enables the management to evaluate performance of various cost centers. Finding of variance- the performance variances are determined by comparing actual costs with standard cost. Management by exception- the targets of different individuals are fixed if the performance is according to predetermined standards. Cost control- every costing system aims at cost control and cost reduction. Right decisions- it enables and provides useful information to the management in taking important decisions. Eliminating efficiencies- the setting of standards for different elements of cost requires a detailed study of different aspects. 1. Efficiency measurement-- The comparison of actual costs with standard costs enables the management to evaluate performance of various cost centers. In the absence of standard costing system, actual costs of different period may be compared to measure efficiency. It is not proper to compare costs of different period because circumstance of both the periods may be different. Still, a decision about base period can be made with which actual performance can be compared. 2. Finding of variance-- The performance variances are determined by comparing actual costs with standard costs. Management is able to spot out the place of inefficiencies. It can fix responsibility for deviation in performance. It is possible to take corrective

measures at the earliest. A regular check on various expenditures is also ensured by standard cost system. 3. Management by exception-- The targets of different individuals are fixed if the performance is according to predetermined standards. In this case, there is nothing to worry. The attention of the management is drawn only when actual performance is less than the budgeted performance. Management by exception means that everybody is given a target to be achieved and management need not supervise each and everything. The responsibilities are fixed and everybody tries to achieve his/her targets. 4. Cost control-- Every costing system aims at cost control and cost reduction. The standards are being constantly analyzed and an effort is made to improve efficiency. Whenever a variance occurs, the reasons are studied and immediate corrective measures are undertaken. The action taken in spotting weak points enables cost control system. 5. Right decisions-- It enables and provides useful information to the management in taking important decisions. For example, the problem created by inflating, rising prices. It can also be used to provide incentive plans for employees etc. 6. Eliminating inefficiencies-- The setting of standards for different elements of cost requires a detailed study of different aspects. The standards are set differently for manufacturing, administrative and selling expenses. Improved methods are used for setting these standards. The determination of manufacturing expenses will require time and motion study for labor and effective material control devices for materials. Similar studies will be needed for finding other expenses. All these studies will make it possible to eliminate inefficiencies at different steps. Elyza Elizz L. Caldetera Setting Standards • Setting up standards is based on experience. • The total standard cost includes: – Direct material – Direct labor – Overheads • Standards should be set up in a systematic way so that they are used as a tool for cost control. Various Elements which Influence the Setting of Standards • Setting Standards for Direct Materials – 1st Step • Quality of Material • Price of the Material nd – 2 Step • Cost of Material • Ordering Cost • Carrying Cost • Setting Standards Direct Labor Cost – Standard Labor time for producing • Skilled Labor

• Semi-skilled Labor • Unskilled Labor – Labor rate per hour • Setting Standards of Overheads – Determination of Overheads – Determination of labor hours of unit manufactured – Calculating overhead rate by dividing A by B Jeline Legaspi Performance appraisal  A performance appraisal (PA) or performance evaluation is a systematic and periodic process that assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives. Performance Appraisal can be done with following objectives in mind:  To identify the strengths and weaknesses of employees to place right men on right job.  To maintain and assess the potential present in a person for further growth and development.  To provide a feedback to employees regarding their performance and related status.  It serves as a basis for influencing working habits of the employees.  To review and retain the promotional and other training programmes. Applications of Performance Appraisal  performance improvement,  promotions,  termination Potential Benefits of Performance Appraisals  Facilitation of communication: It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance.  Enhancement of employee focus through promoting trust: Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization.  Goal setting and desired performance reinforcement: organizations find it efficient to match individual worker’s goals and performance with organizational goals.  Performance improvement: well constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations.  Determination of training needs: Employee training and development are crucial components in helping an organization achieve strategic initiatives Advantages of Performance Appraisal

 Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.  Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance.  Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees.  Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure.  Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways:  Through performance appraisal, the employers can understand and accept skills of subordinates.  The subordinates can also understand and create a trust and confidence in superiors.  It also helps in maintaining cordial and congenial labor management relationship.  It develops the spirit of work and boosts the morale of employees.  Motivation: Performance appraisal serves as a motivation tool. This very well motivates a person for better job and helps him to improve his performance in the future. Potential Complications of Performance Appraisals  Detrimental to quality improvement: It is believed by some scholars and practitioners that the use of PAs is more than unnecessary if there is total quality management.  Negative perceptions: Receiving and/or the anticipation of receiving a PA can be uncomfortable and distressful and potentially cause “tension between supervisors and subordinates”  Legal issues: The improper application and utilization of PAs can affect employees negatively and lead to legal action against the organization  Performance Goals: Challenging performance goals can impede on employees’ abilities to acquire necessary knowledge and skills. Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals  Errors: Supervisors will sometimes rate employees more favorably than that of their true performance in order to please the employees and avoid conflict

Charie Legarda
WHO CONDUCTS PERFORMANCE APPRAISAL?  Human Resource Management & Performance Management Human resource management (HRM) conducts performance management which consist of the activities and/or process embraced an organization in anticipating of improving employee performance and therefore, organizational performance.  Performance management is conducted at the : 1. organizational level and ; individual level  The ultimate objective of performance management process is to align individual performance with organizational performance.  The very common and central process of performance management is performance appraisal process which should be able to inform employees about the “organizational goals, priorities and expectations and how well they are contributing to them.” Performance appraisals are conducted at least annually or depends on the policy made by an organization. METHODS OF COLLECTING PERFORMANCE APPRAISAL DATA  Objective production This method consist of direct, but limited measures such as sales figures, production quantity, the electronic monitoring of data entry workers, etc. The measures used to appraise performance would depend on the job and its duties.  Personnel This method is the recording of withdrawal behaviors (absenteeism, accidents), as indicators of poor job performance.  Judgmental Evaluation This method is rater training which means the process of educating raters to make more accurate assessments of performance. METHODS USED IN JUDGEMENTAL PERFORMANCE APPRAISAL  Graphic rating scale  The most commonly used system in PA. On different factors, subordinates are judge on “how much” of that trait or factor they possess.  Employee-Comparison Method  Rather than subordinates being judged against pre-established criteria, they are compared with one another. This method requires the raters to select the two “best” subordinates of the group on each dimension then rank individuals according to the number of times they were selected as one of the “best”.  Behavioral Checklists and Scales  This method concerns “specific behaviors indicative of good or bad job performance”.  Supervisors record behaviors of what they judge to be job performance relevant, and keep a running tally of good or bad behaviors. PEER AND SELF ASSESSMENTS  Peer Assessments

Members of a group evaluate or appraise the performance of their fellow group members.  PEER NOMINATION → involves each group member nominating who he/she believes to be the “best” on a certain dimension of performance.  PEER-RATING→ each group member rate each other on a set of performance dimension.  PEER RANKING→ each group member rank all fellow members from “best” to “worst” on one or more dimensions of performance.  Self-Assessments  Individuals assess and evaluate their own behavior and job performance.  360-Degree Feedback  Is a multiple evaluations of employees which often include assessments from superior(s), peers and one’s self.

Mellisa Gatdula DETERMINATION OF STANDARD COSTS How should the ideal standards for better controlling be determined? COST CENTER According to J. Betty, “A cost center is a department or part of a department or an item of equipment or machinery or a person or a group of persons in respect of which costs are accumulated, and one where control can be exercised” EXAMPLE: • Spending money to run a machinery to produce an item • Building a factory for manufacturing a product CURRENT STANDARDS It is a standard which is established for use over a short period of time and is related to current condition. EXAMPLE: • Wages increase or rise IDEAL STANDARD This is a standard which represents a high level of efficiency. Ideal standard is fixed on the assumption that favorable conditions will prevail and management will be at its best. EXAMPLE: • There will be no unavailability of raw materials, no machine downtime and other interruptions in the production process BASIC STANDARDS May be defined as a standard which is established for use of an indefinite period which may a long period. These standards are revised only on the changes in specification of material and technology productions. NORMAL STANDARDS

As per terminology, normal standard has been defined as a standard which, it is anticipated, can be attained over a future period of time, preferably long enough to cover one trade cycle. Roxan Fernando Performance Appraisal Interviews The performance appraisal (PA) interview is typically the final step of the appraisal process. The interview is held between the subordinate and supervisor. The PA interview can be considered of great significance to an organization’s PA system. It is most advantageous when both the superior and subordinate participate in the interview discussion and establish goals together. Three factors consistently contribute to effective PA interviews: (i) the supervisor’s knowledge of the subordinate’s job and performance in it, (2) the supervisor’s support of the subordinate, and (3) a welcoming of the subordinate’s participation. Employee Reactions to Performance Appraisal Numerous researchers have reported that many employees are not satisfied with their performance appraisal (PA) systems. Studies have shown that subjectivity as well as appraiser bias is often a problem perceived by as many as half of employees. Appraiser bias, however, appears to be perceived as more of a problem in government and public sector organizations. Also, according to some studies, employees wished to see changes in the PA system by making “the system more objective, improving the feedback process, and increasing the frequency of review.” In light of traditional PA operation defects, “organizations are now increasingly incorporating practices that may improve the system. These changes are particularly concerned with areas such as elimination of subjectivity and bias, training of appraisers, improvement of the feedback process and the performance review discussion. Cross-Cultural Implications of Performance Appraisal Performance appraisal (PA) systems, and the premises of which they were based, that have been formed and regarded as effective in the United States may not have the transferability for effectual utilization in other countries or cultures, and vice versa. Performance “appraisal is thought to be deeply rooted in the norms, values, and beliefs of a society”. “Appraisal reflects attitudes towards motivation and performance (self) and relationships (e.g. peers, subordinates, supervisors, organization), all of which vary from one country to the next”. Therefore, appraisal should be in conjunction with cultural norms, values, and beliefs in order to be operative. The deep-seated norms, values and beliefs in different cultures affect employee motivation and perception of organizational equity and justice. In effect, a PA system created and considered effectual in one country may not be an appropriate assessment in another cultural region. For example, some countries and cultures value the trait of assertiveness and personal accomplishment while others instead place more merit on cooperation and interpersonal connection. Countries scoring high on assertiveness consider PA to be a way of assuring equity among employees so that higher performing employees receive greater rewards or higher salaries. Countries scoring low on assertiveness but higher in interpersonal relations may not

like the social separation and pay inequity of higher/lower performing employees; employees from this more cooperative rather than individualistic culture place more concern on interpersonal relationships with other employees rather than on individual interests. High assertive countries value performance feedback for self-management and effectiveness purposes while countries low in assertiveness view performance feedback as “threatening and obtrusive”. In this case, the PA of the high assertive countries would likely not be beneficial for countries scoring lower in assertiveness to employ. However, countries scoring lower in assertiveness could employ PA for purposes of improving long-term communication development within the organization such as clarifying job objectives, guide training and development plans, and lessen the gap between job performance and organizational expectations.

COST CONTROL  The process or activity on controlling costs associated with an activity, process, or company.  Cost control typically includes:  (1) investigative procedures to detect variance of actual costs from budgeted costs,  (2) diagnostic procedures to ascertain the cause(s) of variance, and  (3) Corrective procedures to effect realignment between actual and budgeted costs. PRINCIPLES OF COST CONTROL A. INTRODUCTION  Cost is important to all industry.  Costs can be divided into two general classes; absolute costs and relative costs.  Absolute cost measures the loss in value of assets.  Relative cost involves a comparison between the chosen course of action and the course of action that was rejected.  This cost of the alternative action - the action not taken - is often called the "opportunity cost". b. Basic Classification of Costs  Costs are divided into two types: Variable costs, and fixed costs.  Variable costs vary per unit of production. For example, they may be the cost per cubic meter of wood yarded, per cubic meter of dirt excavated, etc.  Fixed costs, on the other hand, are incurred only once and as additional units of production are produced, the unit costs fall. Examples of fixed costs would be equipment move-in costs and road access costs. Variable Cost  A corporate expense that varies with production output.

 Variable costs are those costs that vary depending on a company's production volume; they rise as production increases and fall as production decreases.  Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the same regardless of production output.  Fixed costs and variable costs comprise total cost.  Variable costs can include direct material costs or direct labor costs necessary to complete a certain project. For example, a company may have variable costs associated with the packaging of one of its products. As the company moves more of this product, the costs for packaging will increase. Conversely, when fewer of these products are sold the costs for packaging will consequently decrease. Fixed Cost  A cost that does not change with an increase or decrease in the amount of goods or services produced.  Fixed costs are expenses that have to be paid by a company, independent of any business activity.  It is one of the two components of the total cost of a good or service, along with variable cost.  An example of a fixed cost would be a company's lease on a building. If a company has to pay P10,000 each month to cover the cost of the lease but does not manufacture anything during the month, the lease payment is still due in full.  In economics, a business can achieve economies of scale when it produces enough goods to spread fixed costs. For example, the P100,000 lease spread out over 100,000 widgets means that each widget carries with it P1 in fixed costs. If the company produces 200,000 widgets, the fixed cost per unit drops to 50 cents. c. Total Cost and Unit-Cost Formulas  As harvesting operations become more complicated and involve both fixed and variable costs, there usually is more than one way to accomplish a given task.  It may be possible to change the quantity of one or both types of cost, and thus to arrive at a minimum total cost.  Total cost = fixed cost + variable cost × output  In symbols using the first letters of the cost elements and N for the output or number of units of production, these simple formulas are:

 C = F + NV  UC = F/N + V d. Breakeven Analysis  A breakeven analysis determines the point at which one method becomes superior to another method of accomplishing some task or objective.  Breakeven analysis is a common and important part of cost control.   If the manual method were adopted, the fixed costs would be low or non-existent. Payment would be done on a daily basis and would call for direct supervision by a foreman. The cost would be calculated by estimating the time required and multiplying this time by the average wages of the men employed. The men could also be paid on a piece-work basis.

Performance appraisal
 A performance appraisal (PA) or performance evaluation is a systematic and periodic process that assesses an individual employee’s job performance and productivity in relation to certain pre-established criteria and organizational objectives. Performance Appraisal can be done with following objectives in mind:  To identify the strengths and weaknesses of employees to place right men on right job.  To maintain and assess the potential present in a person for further growth and development.  To provide a feedback to employees regarding their performance and related status.  It serves as a basis working habits of the employees.  To review and retain the for influencing promotional and other training programmes. Applications of Performance Appraisal  performance improvement,  promotions,  termination Potential Benefits of Performance Appraisals  Facilitation of communication: It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance.  Enhancement of employee focus through promoting trust: Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization.  Goal setting and desired performance reinforcement: organizations find it efficient to match individual worker’s goals and performance with organizational goals.  Performance improvement: well constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations.  Determination of training needs: Employee training and development are crucial components in helping an organization achieve strategic initiatives Advantages of Performance Appraisal  Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.  Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance.  Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyze strengths and weaknesses of employees so that new jobs can be designed for efficient employees.

 Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure.  Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways: a) Through performance appraisal, the employers can understand and accept skills of subordinates. b) The subordinates can also understand and create a trust and confidence in superiors. c) It also helps in maintaining cordial and congenial labour management relationship. d) It develops the spirit of work and boosts the morale of employees.  Motivation: Performance appraisal serves as a motivation tool. This very well motivates a person for better job and helps him to improve his performance in the future.  Legal issues: The improper application and utilization of PAs can affect employees negatively and lead to legal action against the organization  Performance Goals: Challenging performance goals can impede on employees’ abilities to acquire necessary knowledge and skills. Especially in the early stages of training, it would be more beneficial to instruct employees on outcome goals than on performance goals Potential Complications of Performance Appraisals  Detrimental to quality improvement: It is believed by some scholars and practitioners that the use of PAs is more than unnecessary if there is total quality management.  Negative perceptions: Receiving and/or the anticipation of receiving a PA can be uncomfortable and distressful and potentially cause “tension between supervisors and subordinates”  Errors: Supervisors will sometimes rate employees more favorably than that of their true performance in order to please the employees and avoid conflict.

STANDARD COST
An estimated or predetermined cost of performing an operation or producing a good or service under normal conditions. Used as target costs or basis for comparison with the actual costs. Advantages: Efficiency measurement – the comparison of actual costs enables the management to evaluate performance of various cost centers. Finding of variance- the performance variances are determined by comparing actual costs with standard cost. Management by exception- the targets of different individuals are fixed if the performance is according to predetermined standards. Cost control- every costing system aims at cost control and cost reduction. Right decisions- it enables and provides useful information to the management in taking important decisions.

Eliminating efficiencies- the setting of standards for different elements of cost requires a detailed study of different aspects.