The Lean CFO

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9

Standard Costing Debunked

INTRODUCTION

Standard costing has three primary uses in a manufacturing company:

measuring operating performance, protability analysis, and inventory

valuation. In Chapter 5, we learned how a Lean performance measure-

ment system replaces standard costing information, and how measure-

ments such as eciency, utilization, and absorption are eliminated. In

Chapter 6, we learned how to use value stream costing to identify spend-

ing patterns and link cost improvement to changes in operating behavior.

Finally, in Chapter 8, we learned how to eliminate standard costing from

the nancial analysis of business decisions by ...