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The following is from the question:
The company values its inventory using standard costs both for internal management reporting and for inclusion in the year end financial statements. The basis of the standard costs was reviewed approximately 18 months ago.The following control recommendation is given:
A review of all standard costs currently in use should be undertaken by a senior manager in the production department. Actual costs for materials, labour and overheads should be ascertained and compared to the proposed standard costs to ensure they are a close approximation.
The revised standard costs should be reviewed by the production director who should evidence this review. At least annually, a review of the standard costs should be undertaken to ensure they are up to date.
In the last sentence i.e. at least annually a review of the standard costs should be undertaken to ensure they are up to date. Is it talking about the review by the production director or the production manager.
If it is talking about the annual review by the production director then why the time period for review by the production manager not given
Also why both the production manager and production director are reviewing standard costs
Managers “manage” and directors “direct, supervise and review” the work of managers. Managers also “direct, supervise and review” the work of their subordinates … and so on.
For IFRS reporting purposes, standard costs must be kept up-to-date (IAS 2).
The production manager should be responsible for conducting a review, annually, and the director reviews that review.
But why is it not mentioned in the answer that the manager should review the standard costs annually.
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