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Engineering Design Economics
Published in Keith L. Richards, The Engineering Design Primer, 2020
Cost accounting is the process of recording, classifying, analysing, summarising and allocating costs associated with a process, and then developing various courses of action to control the costs. Its goal is to advise the management on how to optimise business practices and processes based on cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
The Basics of ERP Systems for Manufacturing Supply Chains
Published in Odd Jøran Sagegg, Erlend Alfnes, ERP Systems for Manufacturing Supply Chains, 2020
Odd Jøran Sagegg, Erlend Alfnes
Most ERP systems support cost accounting as well. Cost accounting enables managers to study cost connected with activities in the enterprise for making better business decisions. The cost accounting is usually not a part of the financial module of an ERP system but handled in separate module or in the modules where the cost appears. We will touch this subject when discussing the inventory value methods in the inventory management module.
Software Testing
Published in Kim H. Pries, Jon M. Quigley, Testing Complex and Embedded Systems, 2018
Costing for testing is not a trivial task. One method is to use standard cost accounting techniques to come up with a cost; another approach involves using time-driven, activity-based costing. We recommend that the organization use both, with activity-based costing as a sanity check on the conventional calculation.
Order release in production planning and control systems: challenges and opportunities
Published in International Journal of Production Research, 2022
The computation of cost parameters for production planning models is also often problematic. Most cost accounting systems routinely compute full or variable cost per unit, in the former case assuming a base production volume (or, under activity-based costing, some volume of the underlying cost drivers), including allocations of costs that are fixed relative to the specific production or logistics decisions at hand. However, determining the cost per unit of a specific production or logistics activity, such as carrying out a setup or storing a product for a specified time, is a different story. To illustrate the issues involved, consider the issue of estimating setup costs, which are central to most optimisation models involving lot sizing decisions. In many manufacturing environments the costs of the resources required for setups are to a large extent fixed relative to the decision whether or not to perform a setup at a particular time; the people involved are already on the payroll, and the primary variable costs are any scrap generated while calibrating the equipment and, most importantly, the opportunity cost of the time lost to the setup (direct vs. indirect setup costs). Estimating this latter quantity precisely is difficult; in a mathematical programming model this corresponds to the optimal value of the dual variable associated with that machine’s capacity constraint. Correct estimation of this quantity, in turn, requires knowledge of an optimal solution that is impossible to obtain without the setup cost itself. This also indicates that the extent to which capacities are flexible in the short term as well as the impact of higher capacity utilisation due to setups on the resulting queueing phenomena must be considered when determining the setup cost parameters (Karmarkar and Rummel 1990). Furthermore, if lot sizing models influence – via the total setup times per period – the level of resources required for setups (e.g. skilled workers), this might lead to an increase of these capacities in the long run which can justify the use of allocated fixed costs of capacity as indirect setup costs – an important justification of activity-based costing (Schneeweiss 1998). Therefore, determining ‘correct’ cost coefficients requires thorough knowledge of the decision structure in the company. Backordering or shortage costs suffer from similar issues (Cetinkaya and Parlar 1998), and are equally critical to the solution quality.