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Sir what is the difference between increase in budgetary slack and budget padding
Budgetary slack and budget padding are really the same thing.
It is when the manager puts more in the budget for expenses than they really expect to need.
And secondly
Sir below are some problems associated with standard costing
1. Continuous improvement maybe more important than meeting standards
2. Incentives to build inventories
3. Standard cost reports may not be timely
Sir I cannot really understand what exactly is the problem with the above statements
Could you please explain it with examples
Thank you
You have already asked about the first two, and I have explained.
All reports need to be timely (i.e. up-to-date). Standard costs are often only calculated once a year and so might be realistic when calculated, but might get out of date very quickly.
Sir can you tell me due to what reasons might the standard get out of date ?
Could it be due to economical problems such as
The covidWhen the standard cost is calculated we use the current information such as the current cost of materials, the current wage rate, the current amount of materials needed, the current time taken to produce etc. etc.. During the year the cost of materials might change, the wages we pay might change, the time taken to produce might change and so on. So the standard cost might change and the original standard cost become out of date.
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