Product Costs as Decision Aids: An Analysis of Alternative Approaches (Part 1)

2011 ◽  
Vol 26 (1) ◽  
pp. 1-20 ◽  
Author(s):  
Ramji Balakrishnan ◽  
Eva Labro ◽  
K. Sivaramakrishnan
Keyword(s):  
Decision Aids ◽  
Resource Consumption ◽  
Activity Based Costing ◽  
Numerical Example ◽  
Product Costing ◽  
Multiple Dimensions ◽  
Alternative Approaches ◽  
Product Costs ◽  
Common Platform

SYNOPSIS In this first part of a two-part paper, we develop a common platform to characterize several popular approaches for computing product costs. We describe four kinds of product costing systems: traditional volume-based systems, activity-based costing systems, time-driven activity-based costing systems, and resource consumption accounting. We employ a continuing numerical example to illustrate the commonalities and differences among these systems. In Part 2 of the paper, we evaluate the systems along multiple dimensions and offer suggestions for how we might blend the best features of various approaches.

Product Costs as Decision Aids: An Analysis of Alternative Approaches (Part 2)

2011 ◽  
Vol 26 (1) ◽  
pp. 21-41 ◽  
Author(s):  
Ramji Balakrishnan ◽  
Eva Labro ◽  
K. Sivaramakrishnan
Keyword(s):  
Decision Aids ◽  
Three Dimensions ◽  
System Implementation ◽  
Alternative Approaches ◽  
The Cost ◽  
Product Costs ◽  
Current Systems ◽  
Common Platform

SYNOPSIS In the first part of this two-part paper (Balakrishnan et al. 2012), we used a common platform to characterize four popular approaches for computing product costs. In this part, we compare the approaches along three dimensions: (1) the cost of system implementation and maintenance, (2) the ability to provide decision-relevant data, and (3) the provision of incentives to manage the demand for resources. As no system clearly dominates, we show how future approaches might blend the best features of current systems.

Improving Manufacturing Management with Activity Based Costing

2012 ◽  
Vol 472-475 ◽  
pp. 2494-2501 ◽  
Author(s):  
Michael L. Werner ◽  
Fu Yuan Xu
Keyword(s):  
Financial Reporting ◽  
Cost Savings ◽  
Indirect Costs ◽  
Labor Cost ◽  
Activity Based Costing ◽  
Labor Costs ◽  
Product Cost ◽  
Manufacturing Enterprises ◽  
Product Costing ◽  
Product Costs

The calculation of product cost in modern manufacturing enterprises includes assigning direct costs and indirect costs (overhead) to products. Direct material and direct labor costs can be traced to individual products or batches of products. However, because overhead is an indirect cost and benefits more than one product, it is difficult if not impossible to determine the true overhead cost associated with the overhead resources consumed to manufacture individual products produced. The factory resources included in overhead are an important component of manufacturing product. Overhead costs have traditionally been allocated to products using allocation bases which are correlated to the incurrence of cost such as direct labor hours, direct labor cost, or machine hours using one or few plant-wide allocation base for this purpose. The resulting product costs are used for external financial reporting and are also often used internally as a source of information for management decisions. The information provided by traditional cost systems is often so inaccurate it causes managers to do the wrong things. Further, traditional product costing offers little help to managers in their efforts to reduce costs. Activity based costing is a technique that allocates cost based on activities and volumes that cause cost. The use of these cost causes, called cost drivers, significantly increases product cost accuracy and also encourages managers to take cost-cutting actions that result in true cost savings to the firm. This paper will explore activity based costing and how it can help manufacturers to increase product cost accuracy and to reduce costs.

scholarly journals Activity-based costing revisited by managerial economics logic

2007 ◽  
Vol 4 (4) ◽  
pp. 300-309
Author(s):  
Carsten Rohde
Keyword(s):  
Management Accounting ◽  
Resource Consumption ◽  
Opportunity Costs ◽  
Accounting System ◽  
Activity Based Costing ◽  
Numerical Example ◽  
Ex Ante ◽  
Managerial Economics ◽  
Consumption Model ◽  
Management Accounting System

This paper identifies a number of differences in the treatment of costs and expenditures in activitybased costing (ABC) and a management accounting system based on the managerial economics model.At present, ex ante ABC models incorporating a resource consumption model and a resource spending model with what-if capabilities are recommended for activity-based budgeting in order to make betterinformed strategic and operational decisions. Using a numerical example, the paper demonstrates the resulting cost distortions in ex ante ABC models and their profitability segments when costs are nonlinear and in situations where opportunity costs are relevant. The paper also shows how these distortions can be avoided in a budget layout based on managerial economics

scholarly journals Knowing Your Product Costs: A Primer for Farmers and Food Entrepreneurs

EDIS ◽  
2021 ◽  
Vol 2021 (6) ◽  
Author(s):  
Kevin Athearn ◽  
Mark Yarick ◽  
Natasha Parks
Keyword(s):  
Cost Analysis ◽  
Food Processing ◽  
Software Tools ◽  
Business Decisions ◽  
Product Costing ◽  
Cost Calculations ◽  
Product Costs

This publication provides a basic introduction to product costing for farm businesses and food processing enterprises. It describes cost concepts, provides product costing examples, and briefly discusses software tools that can assist with cost analysis. The publication is intended to help farmers and food entrepreneurs understand product costing concepts and do their own cost calculations to assist with business decisions.

scholarly journals Time driven activity based budget in strategic decisions; implementation in a manufacturing company

2015 ◽  
Vol 12 (2) ◽  
pp. 64-73
Author(s):  
Hamide Özyürek
Keyword(s):  
Resource Consumption ◽  
Manufacturing Companies ◽  
Activity Based Costing ◽  
Strategic Decisions ◽  
Manufacturing Company ◽  
Cost Of Time ◽  
The Cost

This study was carried out in order to find out the applicability of time-driven activity based butgeting method at manufacturing companies in Turkey. The results obtained from the application of time driven activity based butgeting system can be summarized briefly as follows. Company makes the application through different processes and different products are sold to different customers. For this reason, resource consumption levels of the products vary. Be taken into account in determining the cost of time consumed in the product gives more accurate results. Down to the cost of the follow-up activities with the factory Time Driven Activity Based Costing it is possible to do. Just when you need to update the equation will be determined and put in place are sufficient

scholarly journals Analisis Harga Pokok Produksi Dengan Metode Activity Based Costing Untuk Mengambil Keputusan Manajemen Pada Industri Garmen CV. Surya Surabaya

2013 ◽  
Vol 10 (1) ◽  
Author(s):  
Carolina Kumalasari
Keyword(s):  
Production Cost ◽  
Production Control ◽  
Descriptive Analysis ◽  
Analysis Method ◽  
Activity Based Costing ◽  
Research Subjects ◽  
Product Costing ◽  
The Difference ◽  
Abc Method ◽  
The Cost

      This study aims to calculate the cost of goods manufactured baby clothes garment CV Surya Surabaya with the ABC method for reporting purposes and objectives of decision making in gaining competitive advantage . Data analysis method used is descriptive analysis method . The results showed that the conventional cost accounting applied in the enterprise value of the difference of the calculation produces the ABC method. Calculation of costs by activity-based costing method is expected to assist management in making more informed decisions as to be benefit/profit. Data collection methods used in this study is documentation . Research subjects in this study is the production cost of baby clothes in CV Surya Garments Surabaya . The research object in this study is the data associated with the determination of the production cost of baby clothes. The difference between the production cost of conventional methods with activity-based costing method produces values undercosting conditions ( conditions in which a product has a lower cost than the actual cost is absorbed by the product ) and overcosting ( a condition in which a product has a higher cost than  the  cost of which is actually absorbed by the product ). Analysis undertaken in this study members advise the Company to undertake restructuring of the production process and production control for the results of each period more  evenly , because  the  fixed overhead costs is  greater than the variable overhead costs , it is most impact in the calculation of the cost of production.Keywords: Conventional Metode, Activity Based Costing Metode, Product costing

Product Costing and Pricing under Long-Term Capacity Commitment

2002 ◽  
Vol 14 (1) ◽  
pp. 79-97 ◽  
Author(s):  
Rajiv D. Banker ◽  
Iny Hwang ◽  
Birendra K. Mishra
Keyword(s):  
Demand Growth ◽  
Pricing Decisions ◽  
Product Costing ◽  
Optimal Capacity ◽  
New Information ◽  
Capacity Choice ◽  
Cost Parameters ◽  
Product Costs ◽  
Second Period

We develop a model to analyze optimal product-costing and pricing decisions in a dynamic information environment under long-term-capacity commitment. The arrival of new information about demand and cost parameters each period makes the problem complex. The optimal prices and capacity choices in our model cannot be decoupled as in Banker and Hughes' (1994) single-period model. The optimal prices are based on product costs that are adjusted each period to reflect changes in expected variable costs as well as utilization of fixed activity resources. The charge for each fixed resource is monotonically increasing in the expected demand for that resource in each state given the optimal capacity choice. The average optimal prices across periods and states are similar to Banker and Hughes' (1994) benchmark prices. Finally, we investigate a two-period version of the model to explore the optimality of carrying idle capacity. The optimal product-cost charge for fixed capacity is strictly less in the first period than in the second period when the firm expects demand growth.

scholarly journals Costing methods utilization in Czech enterprises.

2013 ◽  
Vol 1 (1) ◽  
Author(s):  
Boris Popesko
Keyword(s):  
Research Methodology ◽  
Basic Research ◽  
Cost Structure ◽  
Final Part ◽  
Activity Based Costing ◽  
System Utilization ◽  
Product Costing ◽  
Different Types ◽  
Costing System ◽  
The Individual

This paper presents the results of the research of the different types of product costing methods utilization in Czech enterprises performed in the years of 2004, 2007 and 2009. Results of individual surveys are compared, in order to prove the expected tendencies of higher usage of modern costing methods such as Activity-Based Costing, in recent years. First part of the paper refers to previous studies of the enterprise cost structure presented by other authors and illustrates the most important reasons of the individual costing system utilization. Following part of the paper defines the basic research methodology and expected limitation of the study. In final part of the paper, results of the survey are introduced and properly discussed.

Sign in / Sign up

Export Citation Format

Share Document