Standard Costing Games That Managers Play

Article Abstract:

Standard cost systems are designed to provide managers with information concerning expected standards for manufacturing operations and variances of performance from the standards. However, sometimes the standards cause misinformation. Standards are often not adjusted despite production capacity. A scheduled change may be set into the standard-setting process but may have no relevance to reality. The methods change and material mix variances are employed to adjust for changes, but are not accurate. For a company with many products, an all-encompassing standard is sometimes used for all products. In other cases, achievable standards are calculated by adding to a realistic standard. Some guidelines helpful for setting realistic standards include evaluating whether standards are current, relevant, used in a positive way, futuristic and realistic. Without realistic standards, pricing will be incorrect and control of production will be inadequate.

Standards, Methods, Product information, Budget, Budgeting, Budgets, Managerial accounting, Cost (Economics), Costs (Economics)

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Simulating health expenditures under alternative insurance plans

Article Abstract:

An empirical model that simulates individual health care expenditures is presented in terms of their implications to the indemnity-type insurance plan design. This simulation model forms part of the Health Insurance Experiment of RAND Corp and provides approximations of the effects of insurance on episode frequency and episode costs. Insurance largely influences the decisions of individuals to go for treatment and has only minimal influence on episode costs. Some of the implications of the insurance design simulation model are that demand is curbed even by relatively small deductibles, and that maximum dollar expenditure limits or caps on $1,000-2,000 out-of-pocket expenses per person are economically viable and better than family caps.

Commercial nonphysical research, Accident and health insurance, Models, Planning, Insurance, Contracts, Health insurance, Medical care, Cost of, Health care costs, RAND Corp.

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