The applicability and suitability of standard costing and variance analysis in local confectionaries

Abstract

This study provides an investigation into the extent to which standard costing and variance analysis is being applied in the local confectionery industry. Its key research objective is intended to provide an insight into the extent to which a gap between theory and practice exists, the reasons impinging on the lack of use of standard costing and if the practices being used in the industry are of the appropriate nature. A census study was conducted amongst the eighty participants making up the targeted population. Structured questionnaires were used as the main research tool for the purpose of collecting data. However due to the low response received the researcher felt it was necessary to receive additional information through the use of the telephone. The study concludes that a gap between theory and practice exists with respect to the application of standard costing. The results show that the firms in the industry still lack a proper costing system which enables them to establish which cost elements differed from the original plan and why. This is because most of the firms do not employ a qualified accountant and do have people with the necessary skill to compile such analysis. It is being recommended that an association is setup to represent the industry this could facilitate training which might be needed by the entrepreneurs in the industry. Furthermore the industry needs to setup a cooperative so that together they could venture into the European market. Due to the small size of the firms, few firms have necessarily financial capabilities to venture into such competitive environment.