A standard costing system is the traditionally used costing system. It has two main purposes: cost control and product costing. Standard costs are determined by accountants working together with other employees of the organization. Which employees outside of accounting do you think should be an integral part of setting the standard costs for products?
When setting the standard costs for products in a standard costing system, it is important to involve employees from various departments who have valuable insights and expertise. While accountants play a crucial role in determining standard costs, involving employees from other areas can provide a more comprehensive and accurate assessment of costs. Here are some employees outside of accounting who should be an integral part of setting standard costs for products:
1. Production and Operations Managers: These individuals have detailed knowledge of the production process, including labor requirements, material usage, and equipment needs. They can provide valuable input on how much time, labor, and materials are required to produce a unit of a product.
2. Purchasing Managers: Purchasing managers have insights into the cost of raw materials and can provide information on market prices, supplier negotiations, and any changes in material availability or costs. Involving them can ensure that standard costs accurately reflect the costs of acquiring materials.
3. Engineers: Engineers can contribute their technical expertise to evaluate the manufacturing process, identify potential inefficiencies, and suggest ways to optimize resource utilization. Their involvement is crucial for accurately determining the standard costs related to equipment usage, maintenance, and energy consumption.
4. Quality Control Specialists: Quality control specialists can provide insights into the costs associated with ensuring product quality. They can contribute to determining the standard costs related to quality inspections, rework, and scrap.
5. Sales and Marketing Managers: Involving sales and marketing managers can provide important insights into market dynamics, customer preferences, and pricing strategies. They can help in assessing the market demand and competition, which can impact product costs and pricing decisions.
By involving these employees outside of accounting in the process of setting standard costs, a more accurate, comprehensive, and realistic understanding of the costs involved in producing a product can be achieved. This collaborative approach ensures that standard costs reflect the various perspectives and expertise of individuals across different departments within the organization.