Establish standards of standard costing with the application of convergent gray zone test

According to surveys, manufacturing industries adopt standard costing for cost control. Traditionally, many accountants believed the most effective standards were those set by industrial engineers with the participation of operating managers to be evaluated. However, some accountants argue that such standards set by the Engineering Approach cannot verify if the standards are too loose or too rigid and fail to provide sufficient incentives for employees to improve beyond the standards. Limitations of the Engineering Approach arise from an ever-changing industrial environment. Under fluctuating circumstances, human deduction and thinking processes utilize non-binary logic and therefore contain fuzzy factors. With fuzzy factors excluded from the Engineering Approach, its ability to reflect problems is doubtful. This paper combines the fuzzy Delphi method with industrial standard costing so as to develop a convergent gray zone test (CGZT). The CGZT not only includes fuzziness but also effectively tests appropriateness of setting standards in an unstable climate.