Greenwich Engineering

Greenwich Engineering is a typical manufacturing company. Over the last decade there has been

an increase in product diversification and factory automation and a reduction in the direct labour

hours worked each year. Competition has increased and the company wants to build a reputation

as a global leader in implementing modern manufacturing methods. To be successful the senior

managers recognize that they must improve existing management accounting systems.

The Charlton Division has a standard costing system that was first introduced in the $1960$s$.$

Recently the managing director asked all managers for their comments on the existing

management accounting system and to identify what changes they would like to see in the future.

One group of managers stated their concerns that the management accounting system has failed

to evolve in a manner compatible with a changed technological and competitive environment.

Several of the senior managers are now predicting that the standard costing system will have a

less important role in the future and it will not be used to judge managerial performance. This

implies that variance analysis is less relevant compared to $20$ years ago.

Another group of managers still believe there is a need for a standard costing system. In their

view variance analysis has been important for many years and will continue to be important for

judging managerial perfoGreenwich Engineering

Greenwich Engineering is a typical manufacturing company. Over the last decade there has been

an increase in product diversification and factory automation and a reduction in the direct labour

hours worked each year. Competition has increased and the company wants to build a reputation

as a global leader in implementing modern manufacturing methods. To be successful the senior

managers recognize that they must improve existing management accounting systems.

The Charlton Division has a standard costing system that was first introduced in the $1960$s$.$

Recently the managing director asked all managers for their comments on the existing

management accounting system and to identify what changes they would like to see in the future.

One group of managers stated their concerns that the management accounting system has failed

to evolve in a manner compatible with a changed technological and competitive environment.

Several of the senior managers are now predicting that the standard costing system will have a

less important role in the future and it will not be used to judge managerial performance. This

implies that variance analysis is less relevant compared to $20$ years ago.

Another group of managers still believe there is a need for a standard costing system. In their

view variance analysis has been important for many years and will continue to be important for

judging managerial performance.rmance.