IN this video, I discuss trends in cost accounting. Trends in cost accounting include channel and customer profitability reporting, integration of enterprise performance management methods (e.g., strategy maps, balanced scorecard), driver-based rolling financial forecasts, applying analytics, and co-existing methods
Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides CPA exam questions and simulations.
Instagram Account: @farhatlectures
Linkedin: https://www.linkedin.com/in/professor.
Facebook: @accountinglectures
Twitter: @farhatlectures
Email:
[email protected]#cpaexam #costaccounting#accountingstudent
Cost Accounting in Research and Development (R&D)
Lean manufacturing techniques, in which Toyota Motor Company is considered a leader, are not simply about production. Companies partner with suppliers in the development stage to ensure cost-effective designs for products. Product engineers need cost accounting information to make decisions about alternative materials. For example, Tesla, a manufacturer of electric cars, needs to make trade-offs between battery life and weight. A larger battery, providing greater range, weighs more, resulting in reduced efficiency. Understanding the life-cycle costs of different technologies (including operation and disposal) is important in balancing performance and efficiency.
ost Accounting in Design
An important activity in product development is design. Product designers must write detailed specifications on a product’s design and manufacture. The design of a product can have a significant impact on the cost to manufacture it. Designs that are complex might add additional functions, which, while making a product more desirable, may also require complex and expensive manufacturing processes. Design for manufacturing (DFM) is the concept that manufacturing cost and complexity need to be considered in the design of the product. Cost accountants help designers understand the trade-off by using methods such as activity-based costing, which considers the activities or processes that will be required to bring a product to market. Designers at IKEA, for example, use costing information to engineer costs out of their designs, which can take up to five years to develop.
Cost Accounting in Purchasing
Companies now partner with suppliers to increase the efficiency in the supply chain. Partnering requires information on the performance of partners to ensure the relationship adds value. Performance measures are being used to evaluate the performance of key suppliers and business partners. For example, United Technologies has an extensive supplier metrics system. Included in the supplier assessment are factors such as quality, delivery performance, and customer satisfaction.
Cost Accounting in Production
Operations managers and financial accountants use cost information in the production stage to understand and report the costs of the multiple products produced. One of the most important developments in production, associated with lean manufacturing, is the use of just-in-time (JIT) methods. Using just-in-time methods, companies produce or purchase units just in time for use, keeping inventories at a minimum. If inventories are low, accountants can spend less time on inventory valuation for external reporting and more time on managerial activities.
Cost Accounting in Marketing
Marketing managers require cost accounting information to understand the profitability of different customer groups. Advances in accounting information systems that capture data at various levels of detail have made possible customer relationship management (CRM), which allows firms to target more precisely those customers who are profitable by assessing the costs to serve a customer along with the revenues a customer generates. For example, Harrah’s Entertainment is able to compete on the basis of providing complimentary services to customers (typically called “comping”) based on their expected personal profitability.
Cost Accounting in Distribution
Earlier, we said that managers use accounting information to determine where in the supply chain value-added activities will take place. Cost accountants work with managers to estimate whether it is more efficient (less costly) to perform an activity in the firm or to have another firm produce the product or perform the service. This is referred to as outsourcing. Firms frequently consider activities in the distribution stage for outsourcing. As business becomes more global, specialized information on markets, regulations, and customs is critical to the speed of delivery. As a result, cost information often identifies specialized companies as being more efficient in distributing products, as opposed to handling distribution internally.