Eileen Bellows is controller at a new,rapidly growing company that produces replacement windows for existing houses or for initial installation in new houses.Competition is stiff in this industry,but the company for which Eileen works is aggressive in sales development,and just showed a modest profit for the first year since its founding four years ago.Howard Zeller is controller at Accents Incorporated,an established drapery and blinds manufacturer.Accent is an industry leader and has experienced sustained growth in both sales and profits for the past five years.Eileen: Our manufacturing support costs seem to be growing over time.For planning and control purposes we're using "currently attainable" standards in our standard cost system,including the costing of manufacturing overhead.But now that we're making profit,I've been thinking of a switch to tighter standards.Howard: We've always used ideal standards,although our enforcement of these goals hasn't been strict.It seems to work for us.
Required: What does this conversation say about each company's expectations regarding their standard cost system and anticipated variances from each of the two different systems?

Question

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Feedback: Both companies are using standards to control costs and motivate workers.Each has adjusted its enforcement of either "strict" or "attainable" standards to make the standards realistic and attainable,but still have goals that encourage continuing improvement.Perhaps Eileen believes that her company needs to set higher goals for workers now that the less strict goals seem to have been met,i.e. ,the company has finally posted a profit.One might question whether enforcement of increasing standards might not have to be initially relaxed in order to avoid worker resistance to this increase in expectations.However,a company that is new and marginal may need standards that will produce maximum cost control and efficiency.The ideal standard is an achievable standard,but "tight" enough that it probably will not be reached except occasionally.It becomes a goal to work towards,rather than a representation of expected short-term performance.As long as workers view the standard as realistic and achievable,a level of enforcement consistent with current period goals should be effective for cost control and worker motivation for continuous improvement.Again,the larger point here for students to understand is that choices made regarding the characteristics of a standard cost system have likely behavioral consequences,which can either help the organization achieve its goals or hinder it from doing so.

Eileen Bellows Is Controller at a New,rapidly Growing Company That