Chapter 14 Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures
Chapter 14
Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures
Case
14-1: Pet Groom and Clean Company
Readings
14-1: “Standard Costing Is Alive and Well at Parker Brass” by D. Johnsen and P. Sopariwala, Management Accounting Quarterly (Winter 2000), pp. 12-20.
The Brass Products Division of the Parker Hannifin Corporation is a world-class manufacturer of tube and brass fittings, valves, hose, and hose fittings. Despite the introduction of popular new costing systems, the Brass Product Division operates a well-functioning standard costing system.
Discussion Questions:
1. What features in the firm 's standard costing that make it a success?
2. In addition to variances seen in the textbook Parker Brass created several new variances. Describe these variances. Why are these variance added at Parker Brass?
14-2: “Redesigning Cost Systems: Is Standard Costing Obsolete?” by Carole B. Cheatham and Leo B. Cheatham, Accounting Horizons (December 1996), pp. 23-31.
The article shows some new ways to analyze standard cost data, going beyond the traditional emphasis on production costs variances that focus on price and efficiency. Variances for product quality are developed and explained, as well as sales variances based on sales orders received and orders actually shipped. There is also a discussion of how to incorporate activity-based costing, and continuous standard improvement, including benchmarking and target costing.
The main premise of the article is that standard cost systems are the most common cost systems in use, and while there are a number of limitations to these systems, a careful and creative effort can transform them into more useful cost systems.
Discussion Questions:
1. What are the main criticisms of traditional standard cost systems?
2. What is meant by “push through” production? Is it preferred to “pull through” production, and why?
3.
Operational Performance Measurement: Sales and Direct-Cost Variances, and the Role of Nonfinancial Performance Measures
Case
14-1: Pet Groom and Clean Company
Readings
14-1: “Standard Costing Is Alive and Well at Parker Brass” by D. Johnsen and P. Sopariwala, Management Accounting Quarterly (Winter 2000), pp. 12-20.
The Brass Products Division of the Parker Hannifin Corporation is a world-class manufacturer of tube and brass fittings, valves, hose, and hose fittings. Despite the introduction of popular new costing systems, the Brass Product Division operates a well-functioning standard costing system.
Discussion Questions:
1. What features in the firm 's standard costing that make it a success?
2. In addition to variances seen in the textbook Parker Brass created several new variances. Describe these variances. Why are these variance added at Parker Brass?
14-2: “Redesigning Cost Systems: Is Standard Costing Obsolete?” by Carole B. Cheatham and Leo B. Cheatham, Accounting Horizons (December 1996), pp. 23-31.
The article shows some new ways to analyze standard cost data, going beyond the traditional emphasis on production costs variances that focus on price and efficiency. Variances for product quality are developed and explained, as well as sales variances based on sales orders received and orders actually shipped. There is also a discussion of how to incorporate activity-based costing, and continuous standard improvement, including benchmarking and target costing.
The main premise of the article is that standard cost systems are the most common cost systems in use, and while there are a number of limitations to these systems, a careful and creative effort can transform them into more useful cost systems.
Discussion Questions:
1. What are the main criticisms of traditional standard cost systems?
2. What is meant by “push through” production? Is it preferred to “pull through” production, and why?
3.
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