Applicability of Standard Cost Systems Portfolio management is a powerful concept infinance and marketing. The marketing application of the concept is to develop and manage a balanced portfolio of products. Market share and market growth can be used to classify products forportfolio purposes, and the product classifications often are extended to the organizational units thatmake the product. The market share/growth classifications can be depicted as follows:Market ShareMarket Growth Rate High LowHigh Rising star ?Low Cash cow DogThe question mark is the classification for products that show high growth rates but have smallmarket shares, such as new products that are similar to their competitors. A rising star is a highgrowth, high-market-share product that tends to mature into a cash cow. A cash cow is a slowgrowing established product that can be milked for cash to help the question mark and introducenew products. The dog is a low-growth, low-market-share item that is a candidate for eliminationor segmentation. Understanding where a product falls within this market share/growth structure isimportant when applying a standard cost system.Required1. Discuss the major advantages of using a standard cost accounting system.2. Describe the types of information that are useful in setting standards and the conditions that must bepresent to support the use of standard costing.3. Discuss the applicability or nonapplicability of using standard costing for a product classified as (a) acash cow and (b) a question mark.4. What are some primary criticisms of using standard cost systems in today’s manufacturing environment?
Applicability of Standard Cost Systems
finance and marketing. The marketing application of the concept is to develop and manage a balanced portfolio of products. Market share and market growth can be used to classify products for
portfolio purposes, and the product classifications often are extended to the organizational units that
make the product. The market share/growth classifications can be depicted as follows:
Market Share
Market Growth Rate High Low
High Rising star ?
Low Cash cow Dog
The question mark is the classification for products that show high growth rates but have small
market shares, such as new products that are similar to their competitors. A rising star is a highgrowth, high-market-share product that tends to mature into a cash cow. A cash cow is a slowgrowing established product that can be milked for cash to help the question mark and introduce
new products. The dog is a low-growth, low-market-share item that is a candidate for elimination
or segmentation. Understanding where a product falls within this market share/growth structure is
important when applying a standard cost system.
Required
1. Discuss the major advantages of using a standard cost accounting system.
2. Describe the types of information that are useful in setting standards and the conditions that must be
present to support the use of
3. Discuss the applicability or nonapplicability of using standard costing for a product classified as (a) a
cash cow and (b) a question mark.
4. What are some primary criticisms of using standard cost systems in today’s manufacturing environment?
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