Definitions for TrueValueMetrics
Standards ... Standard Cost and Standard Value
Standard cost and standard value are very powerful techniques for managing and getting control of very large and complex operations.
Actual cost systems are data intensive, with very many transactions that vary all the time, but only in a consequential way rather infrequently. The aggregate of these transactions is important, and the aggregate should not vary very much unless there is something going on that is of importance. A standard is built by being thoughtful about the item ... whether cost or value. The aim is to determine what the cost or the value should be.
In the aggregate the cost or value should be the unit standard times the number of items. In the case of costs, the aggregate of actual costs should be about the same as the aggregate standard cost. If there is a substantial difference, then there needs to be analysis to see what is causing the variance.
Value is different ... but when the consumption of value (a standard value calculation) exceeds the product of value ... that is the creation of value (another standard value calculation), then there is the need for inquiry.
Arguably, the core of TVM is the use of value ... and specifically the use of standard value. Everyone knows that value is important ... but nobody wants to embrace value as a numeric measurable elements, despite the fact of its centrality to quality of life ... everything that is important in society.