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School of Business | Department of Accounting | Accounting | 2014
Thesis number: 13705
Fundamental difficulties of employing standard costing - Case study from manufacturing industry
Author: Välimäki, Julius
Title: Fundamental difficulties of employing standard costing - Case study from manufacturing industry
Year: 2014  Language: eng
Department: Department of Accounting
Academic subject: Accounting
Index terms: laskentatoimi; accounting; kustannuslaskenta; cost accounting; standardit; standards; tuotteet; products; kustannukset; costs
Pages: 89
Key terms: cost accounting; standard costing; standard costing system
The main objective of this case study is to understand and explain fundamental difficulties of employing standard costing in the case company operating globally in manufacturing industry. It is crucial to understand the problematic areas since standard costing system is used for product costing, decision-making and operational control. The secondary objective is to analyse findings and develop solution suggestions for the identified challenging areas.

The research used mainly foreign literature and articles from scientific publications to build a sound theoretical framework. The empirical part of the study used the case company's internal material, interviews, observations, informal discussions and information systems. The data was gathered in 2013-2014.

The results of this thesis suggest that operational factors, standard costing system and standards maintenance are the areas where most of the standard costing difficulties stem from. Based on the case study, the main problems within the areas are complex operating conditions, lack of tools to control operations, standardized SCS, standard costs deviations from actuals, non-optimal system use, lack of variance analysis on product group level, partial negligence of standards thorough cost audit, and standard costs inadequateness with continuous improvement.

Based on the analysed findings of the case study, standard costing improvement suggestions are presented to provide assistance in the difficult areas. The suggestions are concentrated to standard costing system and standards maintenance. In addition, a product cost simulator is introduced to support standard costing system in the areas where it's mostly struggling. The product costing simulator is assessed to be valuable for evaluating new and existing product level costs, improving standard costs design, seeking cost reductions, steering sales, and improving operational control.
Master's theses are stored at Learning Centre in Otaniemi.