An Operator's Viewpoint Of The Standard Cost System

One of the major challenges to management in the mining industry today is the establishment and maintenance of positive and dynamic programs for cost control and cost reduction. To meet the challenge, management must have a good cost system. There are various types of cost accounting systems in use today: some companies check their, performance by comparing the costs incurred during one period with the costs incurred during previous periods, while others compare the current costs with estimated costs which the company considers desirable. A third type of system is a standard cost system which provides predetermined allowances for the various cost elements and operating activities. Such a system, based on sound standards, can be established to fix responsibility for cost performance in each segment of the operation; recognize the impact of volume or rate of activity by establishing a standard volume and evaluating departures: take into consideration fixed and variable costs and their dissimilar behaviour at varying levels of operations: and provide consistent and equitable yardsticks for measuring performance.