Is Standard Costing Still Relevant Evidence From Dubai – Coursework Example
Instruction: Task: Is Standard Costing Still Relevant? Evidence from Dubai Standard costing is a mechanism that involves preparing detailed cost as well as sales budgets of which are compared with actual results within a precise account period in addition to significant variances amid the actual results and the estimated results and later investigated. Trends that are unexpected are rectified if they happen to be unacceptable are non-accommodated.
It is argued that tools such as standard costing as well as variance analysis are pre-dominantly becoming disconnected from the actual practices in industries since such an environment that is so intense in competition will require higher levels of complexity when, it comes to costing systems ( Marie 1).
In a case study in Dubai, construction companies thrive the most thus standard costing proving inadequate in building strategy as well as operational management. It has been described as one method that is potentially “dysfunctional”. However, in the U.K and some parts of the Oceania like Switzerland standard costing is preferred over tools of production management and modern costing. The respondents predict an augmentation in the use of older tools. The same case applies to parts of Asia and Japan where 70% or more of local firms still use standard costing (Richard Fleischman and Thomas Tyson) (Marie 1).
The studies carried out in these regions indicate that standard costing puts more emphasis on quality management rather than cost control. Nevertheless, with the conflicting views seen in the academic research, basing our opinions on Dubai, which is the hub of economy experiencing quite a fast growth in the world we realize something different, unlike other regions. This government has freed up wages and prices, has rationalised indirect taxes whereby the companies are disaggregated by sectors i.e. industrial versus service reason being contextual whereby a foreigner cannot possess 50% or more of any company not unless the said is found in free zones. In the industrial sector, most businesses are involved in construction companies while the least being oil and gas (Marie 2).
We realize from the evidence that standard costing functions more in Dubai’s industrial sector than service sector. But in terms of importance on one hand the inventory costing is key for, standard costing for Dubai industries as well as parts of Asia like Malaysia, and the U.K and on the other hand budgeting stands out as the most important function in the service sector.
Marie, Attiea, et al. "Is standard costing still relevant? Evidence from Dubai." Management Accounting Quarterly 11.2 (2010): 1.