write a background of the study, ''effectiveness of standard costing as a control tool on performance; not more than two pages

Background of the Study

Standard costing is a traditional cost accounting method and an essential part of the managerial accounting process. It is a technique that uses standards for costs and revenues for the purpose of control through variance analysis. Standard costing is a tool widely used by businesses as a control measure to enhance performance. This study aims to investigate the effectiveness of standard costing as a control tool on performance.

The concept of standard costing has been in existence for many years and has been applied in different sectors of the economy, including manufacturing, service, and non-profit organizations. It is a system under which the cost of a product is determined in advance on certain pre-determined standards. These standards are then compared with the actual cost, and the difference is treated as a variance. The variance is analyzed for the reasons and responsibilities are fixed, and corrective actions are taken.

The use of standard costing as a control tool is based on the premise that by setting predetermined costs, organizations can effectively plan and control their business operations. It provides a benchmark against which actual performance can be measured and evaluated, thereby enabling managers to identify areas of inefficiency and take corrective action.

However, despite its widespread use, the effectiveness of standard costing as a control tool on performance has been a subject of debate among scholars and practitioners. Some argue that standard costing provides an effective means for cost control and performance improvement, while others contend that it may not always lead to the desired outcomes due to various factors such as changes in the business environment, technological advancements, and human behavior.

In recent years, the business environment has become increasingly dynamic and complex, characterized by rapid technological changes, intense competition, and evolving customer needs. These changes have significant implications for cost management practices, including standard costing. Therefore, it is crucial to re-examine the effectiveness of standard costing as a control tool in this changing business environment.

This study will contribute to the existing body of knowledge by providing empirical evidence on the effectiveness of standard costing as a control tool on performance. The findings of this study will be of significant value to both academics and practitioners in the field of cost accounting and management. It will provide insights into the conditions under which standard costing can be effectively used as a control tool to enhance performance.

In conclusion, the background of this study is rooted in the need to understand the effectiveness of standard costing as a control tool on performance in the contemporary business environment. The study will explore the theoretical underpinnings of standard costing, its application in different sectors, and its effectiveness as a control tool. The findings will provide valuable insights for businesses seeking to enhance their performance through effective cost control.