The ever increasing use of standard cost provides a necessary measure of what cost should be. These standard cost permit an early preparation and presentation of short-run cost reports to operating management and summary statement to executive and middle management highlighting deviations from the planed goals. Reports comparing actual results with planed or budget figures based on standard cost bring to management only information the regarding the profits already made but also those that should have been made. Standard cost should ideally be integrally part of the budget in its preparation was its use a control device.

The return on capital employed ratio has been illustrated in connection with the analysis of the financial statements. Break even analysis offer another method that permit management to judge the overall plan on a pragmatic and convenient basis. To calculate the break-even point it is first necessary to observe the behavior of cost as to their fixed or variable nature. For the present it suffices to say that direct materials and direct labor are fundamentally considered variable costs.

Be the first to comment on "PLANING AND CONTROL MODELS"

Leave a comment

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.