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Introduction
Since, the introduction of standard costing in early 1900s, it has been widely used by companies around the world for various purposes such as cost control; valuation of stocks; budgeting; cost reduction; etc. Standard costing gained popularity among managers as a powerful control tool as it allowed them to employ management by exception, an approach that investigated only the most significant deviations from predetermined levels of performance and to allocate their energies to those areas that could benefit most from their attention.
Over the past decade, manufacturing companies have faced both increasing technological innovation and more competitive markets ([5] Chang et al. , 2005, p. 116). With the drastic changes occurring in the manufacturing environment, where standard costing is practiced, specially owing to the increase in use of advanced manufacturing technologies such as automation, just-in-time (JIT) manufacturing, total quality control systems, etc. the applicability of standard costing as a control tool has started to decline. Traditional management accounting techniques such as standard costing and variance analysis, traditional budgeting and cost volume profit analysis are said to be less useful in the present manufacturing environment ([31] Sulaiman et al. , 2004, p. 493).
The manufacturing environment in Japan particularly has changed drastically as it has the influence of these new technologies more than any other country in the world. These changes in the manufacturing environment seemingly have reduced the significance of standard costing especially as a cost control system. As stated by [13] Kaplan (1990, p. 4) "Japanese companies have been quicker to abandon standard cost systems for variance analysis and control in the new manufacturing environment." [19] Morgan and Weerakoon (1989, p. 43) also held this view when they stated:
Japanese companies recognize that they have reached a strategic turning point and are adjusting their management accounting polices accordingly. They are moving away from standard cost systems installed when the firms used to supply a stable product range to a stable market. Today's vast array of products means that they are subject to rapid obsolesces, and in addition, technological changes pose severe challenges to existing standard cost systems.
[9] Hiromoto (1988) added that in Japan standard cost systems are not used as widely as they are in the USA due to the market...