Leading the Cost Accounting Revolution: Understanding Standard Costing & Unshackling Average Costing to Advance Performance

by Benjamin Wann

For many manufacturing organizations, standard costing has been the default inventory valuation practice for the last several decades. Originating in the 1920s, the Ford Motor Company was the first mass producer to champion and adopt the practice, which borrowed heavily from Frederick Taylor's Scientific Management theories. Standard costing was universally praised by business leaders and widely adopted as an innovation in production control. Since then, businesses and schools worldwide have taught it as the preferred system to control production efficiencies and costs. Standard costing has appealed to companies with large and complex business models, many products, locations, and sales channels for a good reason. It allows the accountants to input prices and quantities captured during the budget cycle and "rolls" the estimate upwards to estimates on profitability. For years, managers and executives have used standard costing processes to steer their organizations and ensure that operations align with the company's strategy and direction. However, the time has come to thoroughly analyze our inventory costing systems to determine if what we already have is good enough or as robust as possible. Confidence in the standard cost system must be questioned as to whether it produces accurate results and delivers what you need, how you need it. Perennial pain points and technological development suggest that a new, better approach is warranted to support the flexibility, depth, accuracy, and speed of organizations today.

685 pages, Kindle Edition

Published October 29, 2022