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International Uses of Standard Costing System:

Standard costing system is used by companies worldwide. A comparative study of cost accounting practices found that three-fourth of the companies surveyed in the United Kingdom, two-third of the companies surveyed in Canada, and 40% of the companies in Japan used standard costing system.

Standard costs were first introduced in Japan after World War II, with Nippon Electronic Companies (NEC) being one of the first Japanese companies to adopt standard costs for all of its products. Many other Japanese companies followed NEC's lead and developed standard cost systems.

The ways in which these standard costs are used in Japan and also in other countries are shown below:

  United States United Kingdom Canada Japan
Cost management 1* 2 2 1
Budgetary planning and control** 2 3 1 3
Pricing decisions 3 1 3 2
Financial statement preparation 4 4 4 4
*The numbers 1 through 4 denote importance of use, from greatest to least.
**Includes management planning.
Source: Compiled from data in study by Shin'ichi Inoue, "Comparative Studies of Recent Development of Cost Management Problems in U.S.A., U.K., Canada, and Japan," Research Paper No. 29, Kagawa University, p. 20.

Over time the pattern of use shown above may change, but at present managers can expect to encounter standard costs in most industrialized nations. Moreover, the most important uses are for cost management and budgetary planning purposes.

Relevant Articles:

Definition and Explanation of Standard Cost
Purposes and Advantages of Standard Costing System
Setting Standards
Materials Price Standard
Materials Price Variance
Materials Quantity Standard
Materials Quantity Variance
Direct Labor Rate Standard
Direct Labor Rate Variance
Direct Labor Efficiency Standard
Direct Labor Efficiency Variance
Factory Overhead Cost Standards
Overall or Net Factory Overhead Variance
Overhead Controllable Variance
Overhead Volume Variance
Overhead Spending Variance
Overhead Idle Capacity Variance
Overhead Efficiency Variance
Variable Overhead Efficiency Variance

Fixed Overhead Efficiency Variance

Mix and Yield Variance
Variance Analysis Example
Standard Costing and Variance Analysis Formulas
Management by Exception and Variance Analysis
International Uses of Standard Costing System
Advantages, Disadvantages, and Limitations of Standard Costing





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