The first question I asked the warehouse management system students was, "Do you know your operating costs?", our production planning management students, "Do you know the cost of producing one of these items?" Years of training, I can count on how many students can answer these questions on the one hand, these questions immediately tell me that their company does not use cost accounting.
The reason students are unable to answer questions is that their company has only so-called management and financial accounting. Management accounting focuses on historical and estimated data management needs for ongoing operations and long-term planning. The purpose of management accounting is to accumulate financial information for making economic decisions.
Financial accounting focuses on the collection of historical financial information for the preparation of financial statements that meet the needs of investors, creditors and other external users of financial information. These statements include balance sheets, income statements, retained earnings statements and cash flow statements. While these financial statements are useful to both management and external users, the use of management in planning and control operations requires additional reporting, timelines and analysis.
Management and financial accounting focus on the company's overall operations and do not provide the detailed information needed to accurately determine product costs and pricing. At best, rates can only be provided. In addition, cost accounting provides detailed cost information management requirements to control current operations and future plans. Management uses this information to determine how resources are allocated to the most efficient and profitable areas of the business.
Costing enables management to properly allocate the costs of raw materials, labor, and other plant resources to the products actually used, rather than distributing them evenly across all products. In the absence of costing, significant investments such as physical assets, development work, depreciation, taxes, insurance, utilities, machine maintenance and repair, material handling, production setup, production planning sales, and administrative expenses are usually concentrated Together, the rate is added to the product as an overhead tag. The true cost of the product has never been determined, which means that the company charges too much for certain products and not enough for other products.
Cost accounting principles have been developed to enable manufacturers to handle many different costs associated with manufacturing and provide built-in control features. The information generated by the cost accounting system provides the basis for determining accurate product and sales prices and helps management plan and control operations.
Determine product cost and pricing
Cost accounting procedures provide a means of determining product costs that enable the preparation of meaningful financial statements and other reports needed to manage the business. Cost accounting information systems must be designed to determine unit costs and total product costs. Unit cost information is also useful in making important marketing decisions, such as determining product sales prices, meeting competition, contract bidding, and analyzing profitability.
Planning and control
One of the most important aspects of cost accounting is writing reports that can be used to plan and control operations. Planning is the means by which a company sets goals or goals and determines whether to achieve goals or goals. Clear objectives and production plans for the manufacturing business will help to effectively plan, assist and guide the company to achieve its goals.
Cost accounting information enhances the planning process by providing historical cost as the basis for future forecasts. Management can analyze the data to estimate future costs and operating results and make decisions about acquiring additional facilities, any changes in marketing strategies, and availability of funds.
Effective control is achieved by establishing cost centers and assigning responsibilities to every detail of the production plan. All managers should be accurate about their responsibilities for efficiency, operations, production and cost. The key to proper control is to use responsible accounting and cost centers by regularly measuring and comparing results and taking the necessary corrective actions.
Orignal From: Cost accounting: the missing part of supply chain management
No comments:
Post a Comment