Redesigning Cost Systems Essay Example | Topics and Well Written Essays - 750 words

Redesigning Cost Systems - Essay ExampleIt seems to cause competition and arguments between departments. They argue over who was to blame for unfavorable variances when using traditional systems.Push with productions is productions that use large amounts of raw material and partially finished products. The materials or products argon moved from one process to another. The preferred method, pull through production, is permutation this old method. The products are in work cells or similar workstations. An employee in a cell can operate several types of equipment. An order can be processed quickly within the cell. The pull through method is preferred because it decreases cycle time and holds on orders. The inventory is not overloaded with this method either. unity group is responsible for the product as a whole. This decreases the chance of defects.The trump out way to make standard cost systems more dynamic is to update the variances. Variances in raw materials can be updated by ad ding a quality variance. This will allow the materials that were produced, but not used, to be factored into the equation. The efficiency variance factors the difference between the weight of the material used and the standard weight used for total production. The traditional method uses the weight of good production instead of total production. some other way to add variances is to split up the volume variance into market size and market share variances. A good way to deal with orders that are completed but not shipped is the Finished Goods Variance. If a sales order could not be filled for any reason, it results in loss of opportunity. To use this as a factor there is a Sales Order Variance. Other ways to add dynamics to the standard system are to use best performance records for a variance on past performances. This is a highly motivating tool for businesses. Benchmarking tracks the performance of competitors. This is another motivating tool. This competition will similarly enc ourage a better product for consumers. Another way to use dynamic standards is through moving cost reductions. This decreases the standard cost by a certain percent each period. Target cost is another method used to make a product viable in todays market. By vista a price before production, manufacturers can find ways to lower the cost until it reaches the target. The reports on SCSs need to be accurate to be viable. A team atmosphere avoids conflict and encourages employees to be responsible. A team using a work cell arrangement and variances on reports will be less promising to be in conflict and in return be more productive. The final way to improve SCSs is to use it in relation to ABC. When a keep company has many indirect cost, ABC results produce better pricing. If combined, ABC can be used for indirect costs or analysis of indirect costs and SCS can be updated and used for direct costs or financial records. 4. Considering the suggestions made in this article, in contrast t o the chapter presentation of standard costing, which ideas make the just about sense to you and whyI like the idea of using the SCS in conjunction with ABC. I make sense to track both direct and