Standard Costing, Operational Performance Measures, and the Balanced Scorecard,10,Chapter Ten,Standard Costs,Benchmarks formeasuring performance.,The expected levelof performance.,Based on carefullypredetermined amounts.,Used for planning labor and material requirements.,Standard Costs are,Management by Exception,DirectMaterial,Managers focus on quantities and coststhat exceed standards, a practice known as management by exception.,Type of Product Cost,Amount,DirectLabor,Standard,Cost Variance Analysis,A General Model for Variance Analysis,AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actual Price SQ = Standard Quantity,Size of variance Dollar amount Percentage of standard Recurring variances Trends Controllability Favorable variances Costs and benefits of investigation,Significance of Cost Variances,Advantages of Standard Costing,Management byException,PerformanceEvaluation,EmployeeMotivation,Sensible CostComparisons,Operational Control Measures in Todays Manufacturing Environment,Raw Material and Scrap Control Inventory Control Machine Performance Product Quality Production and Delivery Productivity Innovation and Learning,Wait Time,Manufacturing Cycle Time,Process Time + Inspection Time+ Move Time + Waiting Time,Order Received,ProductionStarted,Goods Shipped,Delivery Cycle Time,Production and Delivery Performance Measures,The Balanced Scorecard,Financial Perspective How do we lookto the firms owners?,Innovation andLearning PerspectiveHow can we continuallyimprove and create value?,Internal OperationsPerspective In which activities must we excel?,Customer Perspective How do our customers see us?,Exh.10-8,End of Chapter 10,Lets set the standard alittle higher.,