Where is cost management going?

Article Abstract:

Cost management approaches include accounting simplification, backflush accounting for just-in-time (JIT) systems, and resource accounting. Accounting simplification is the process by which an accounting system is made to match the accounting flow emanating from the natural processes of an operation without disrupting the process. Backflush systems, such as the one used by Harley-Davidson, is a system focusing on outputs which traces the outputs backwards in order to allocate costs between inventory and the costs of sold goods. Resource costing is used in JIT systems and under Total Quality Management concepts under which measurements are prioritized. It improves the accuracy of pricing and reduces costs by eliminating standard costs and replacing the with actual costs. In order to ascertain actual costs, the system is based on cost drivers, which improves the accuracy of product costs because it traces conversion costs to products based on activity.

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Where is cost management going?

Article Abstract:

Activity-based costing (ABC) is a cost management technique that uses a two-step process to assign costs to products. The first step involves determining which activities are associated with particular costs, and the second step involves tracing costs to products. Companies that have used ABC have experienced a drastic change in the perception of their product line's profitability. The disadvantages of ABC are the high costs for training staff and implementing the system. The factors to consider when evaluating an ABC system include whether the correct amount of detail is used in defining activities and whether the users are able to interpret the output properly. A glossary of activity-based costing terms is presented.

Direct costing, column

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Advanced cost management systems

Article Abstract:

The advanced cost management systems (ACMS) was developed by Westinghouse and the accounting firm Price Waterhouse to help contain manufacturing costs at defense-related facilities. These facilities are typically involved in highly automated electronic assembly work. The systems developed are flexible to accommodate the needs of other defense contractors with similar needs. ACMS is a process-oriented, standard job-order cost management system. Standards are defined by historical costs, not industrial engineering. The purpose is to provide meaningful information about costs for decision-making. Feedback and focus reports provide the relevant information.

Finance, Accounting and auditing, Technology application, Defense industry, Westinghouse Electric Corp., Defense contracts, Price Waterhouse and Co.

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