Healthcare Heat Lamps Essay Example | Topics and Well Written Essays - 1750 words

Healthcare Heat Lamps - Essay Example To be noted, these processes are often followed through the implementations of standard costing methods (Berger, 2011). However, standard costing possesses both negatives and positives in offering better control to the management when applying cost management strategies. The same will be discussed in this report, taking the example of Healthcare Heat Lamps. Starting with a generalised perspective, the term, ‘standard costing’ will be defined along with the key assumptions of these mechanisms. Standard Costing The term ‘Standard’ refers to the creation of a benchmark or yardstick. Accordingly, the word ‘Standard Costing’ has been defined by the Institute of Cost and Management Accountant of London as a predetermined cost which is taken into concern when producing or performing other operations to distribute each product and/or service to the customers under normal economic conditions. The cost variables considered in standard costing procedures m ight be based on technological requirements for the materials, labour and overheads for the decided period of time as well as effective analysis of the working conditions (Dosen, 2013). In simple terms, standard costing can be described as the technique of designing the criteria of costs as well as revenues (Shaub, 2010). To be precise, standard costing is a traditional concept of accounting which aims at determining the standard of each elementary cost and thus, often acts as a procedure of comparing the predetermined costs with the actual costs. Technically, it is considered as quite beneficial in discovering the deviations that are financially well known as ‘variances’. ‘Variances’ can be defined as the predetermined rate that is generally implemented in the standard costing as well as budgetary control systems. It can be affirmed in this context that the analysis of variances is deemed to be essential to summarize the incidents as well as defining the p rocess of standard costing so as to support the cost control aims of the company (Sivakumar, 2009). The method of standard costing might be based on an assortment of key factors that have been mentioned below. Determining the suitable benchmarks for each component in terms of cost variances Establishment of information regarding actual as well as standard costs that should be executed Comparing actual costs with the standard costs to determine the variances Properly analysing the variances to find out the actual cause of differences in the costs calculated Reporting the responsible authorities for developing and implementing curative measures to mitigate the differences in the costs as deciphered through the variances (Dosen, 2013) In this context, for the better understanding of the concept of standard costing, a pictorial flow chart has been illustrated below: Source: (Kingdee, n.d.) The Key Assumptions Related to the Calculation of Standard Costs The calculation of standard costi ng is generally conducted on the basis of certain key assumptions. These key assumptions have been listed below in a brief manner for comprehensive understanding of