Benchmarking
Benchmarking is the process of comparing a company’s performance to the performance of other companies in the same industry. Benchmarking can be used to identify best practices and to set standards for performance.
Setting Standards in Costing
In costing, standards are predetermined costs that are used to compare actual costs. Standards can be set for the cost of materials, labor, and overhead.
Benchmarking for Setting Standards in Costing
Benchmarking can be used to set standards in costing by comparing a company’s costs to the costs of other companies in the same industry. This can help companies to identify areas where their costs are too high and to set standards that are more realistic.
Benefits of Benchmarking for Setting Standards in Costing
There are several benefits to benchmarking for setting standards in costing, including:
- Identifying best practices: Benchmarking can help companies to identify best practices in the industry. This can help companies to improve their own performance and to set more realistic standards.
- Setting realistic standards: Benchmarking can help companies to set realistic standards. This can help companies to avoid setting standards that are too high or too low.
- Improving performance: Benchmarking can help companies to improve their performance. This can be done by identifying areas where costs are too high and by taking corrective action.
Drawbacks of Benchmarking for Setting Standards in Costing
There are also some drawbacks to benchmarking for setting standards in costing, including:
- Cost: Benchmarking can be a costly process. This is because companies need to collect data from other companies in the industry.
- Time: Benchmarking can be a time-consuming process. This is because companies need to collect data from other companies in the industry and to analyze the data.
- Accuracy: The accuracy of benchmarking data can be an issue. This is because companies may not be willing to share accurate data with other companies.