What is the benchmark cost method?

Cost management of benchmarking standard cost method

With the rapid development of science and technology and the increasing globalization, how to make use of its cost advantage plays a vital role if enterprises want to occupy a place in the international market competition. Facing the new business environment, the traditional cost management methods can no longer meet the needs of enterprises, and enterprises begin to realize the urgency of strengthening cost control. It is at this time that the cost benchmarking method and the standard cost method were born and widely recognized. Cost benchmark method and standard cost method are both effective methods of cost management. The author here intends to compare from the following four aspects.

First, different definitions and connotations

Benchmarking originated in the late 1970s and early 1980s, and its ideas can be traced back to the scientific management theory advocated by Taylor in the early 20th century. At the same time, the implementation of benchmarking in cost management activities can be understood as the company constantly searches and studies the cost information of the best-selling products in the same industry according to its own positioning in the market, explores its cost composition, and compares, analyzes and judges based on its own products, so as to continuously reduce its own costs, improve its competitiveness and enter the ranks of first-class companies. Its core is to learn from the best enterprises inside and outside the industry to achieve the purpose of imitation and innovation.

Standard cost method, also known as standard cost system or standard cost system, is a complete system composed of three aspects: formulating standard cost, analyzing and calculating cost difference and handling cost difference. Originated in the United States, accompanied by Taylor's standardized activity management theory. It is a cost management system that makes corresponding cost standards through detailed analysis of various costs, uses standards, reveals differences with reality, measures and analyzes performance, implements cost control before, during and after, pays attention to raising costs, and uses product standard costs to serve business decisions.

Second, the fee standards are different.

Under the cost benchmarking method, the standard cost of products used by enterprises in production is that enterprises comprehensively analyze and test the prototypes of best-selling products at home and abroad, analyze, retrieve and check the prices of all parts, comprehensively compare the information of the whole machine, make special comparisons according to the types of parts, types of materials, quantity and weight of parts, analyze the material cost and gross profit of all kinds of machines, and finally determine the material cost of their products.

The standard cost of products under the standard cost method is to establish reasonable and scientific quantitative standards for cost centers and products by using sound production, engineering and technical measurement (including time and action research, statistical analysis, engineering experiments, etc.). ), and then quantify the quantification standard as the basis for cost performance measurement and standard product cost calculation. It is formulated after careful investigation, analysis and technical determination, and the cost that can be achieved under normal production and operation, reasonable work efficiency and production capacity.

Third, the application cycle of cost information is different.

The important basis for enterprise managers to carry out production, operation and cost management comes from the cost information obtained by cost calculation. Different cost information can support the decision-making of enterprises in different periods. According to the length of time involved, enterprise decision-making can be divided into short-term decision-making and long-term decision-making

Cost benchmarking is a continuous process of cost comparison between enterprises and powerful competitors in the same industry, and it is an effective means for enterprises to master competitor information and know themselves. In this continuous process, enterprises find and set benchmarks by constantly comparing and analyzing the cost information and structure of excellent enterprises, so as to achieve the purpose of reducing costs. It can be used as a long-term cost strategy for enterprises and provide support for enterprises to win in market competition.

The standard cost provided by the standard cost method is suitable for the short-term planning and control of enterprises. Standard cost is a scientific and reasonable calculation of the materials, labor and expenses consumed by enterprises before production, and then compared with the actual product cost to find out the reasons for the differences, so as to reduce the differences and optimize the product cost. Enterprises generally set or modify standard costs at the beginning of the year. Once set, it rarely changes and is rarely used in the production and business activities plan for more than one year. And now the products are more and more subdivided, and more and more cost standards are formulated by standard cost method. If too many standards are formulated and updated frequently, it will inevitably increase the management cost of enterprises, which will not be worth the loss, thus limiting the role of standard cost method. The combination of standard cost system and variable cost method is helpful for enterprises to analyze the quantity, cost and profit, and can predict the cost, business volume and profit of enterprises. However, when using the standard cost method, if we only pay attention to reducing the cost without paying attention to the causal relationship of the cost, blindly trying to reduce the cost will lead all departments of the enterprise to pursue their own interests and affect the overall interests of the enterprise, which is not conducive to making decisions suitable for the long-term development of the enterprise from the overall situation. #p#

Fourth, there are different ways to reduce costs.

The key factors affecting product cost are process cost, design cost and procurement cost. According to a large number of data, 80% of the product cost has been decided as early as the design. Therefore, considering the cost in the product design stage is the most critical method to reduce the cost, and the opaque operation of purchasing cost will also affect the product cost to a great extent, and the most effective means to reduce the product process cost is process innovation.

Cost benchmarking method, through the detailed analysis of the cost structure of the best-selling products in the same industry, can set the price of their own products, and at the same time learn from other people's advanced manufacturing technology to eliminate false costs from the source and achieve the purpose of reducing costs.

The standard cost rule is to correct the errors produced in actual operation, reflect whether there are wasteful or inefficient processes in the production process through detailed analysis of the differences, and make corrections to reduce costs. We can only optimize the production process for enterprises, thus reducing the cost, and can't fundamentally solve the problem of high product cost.

Through the analysis of cost-based method and standard cost system, we can see the advantages of cost-based method. However, China's current economic environment is relatively complex, with both the environment for the implementation of standard cost method and the space for the existence of cost benchmarking method, which is far from enterprises of different scales and industries. Enterprises should choose their own cost management methods according to their own characteristics and business environment in order to be at the forefront of the competition.