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WEEK 3 - Coggle Diagram
WEEK 3
WHY ALLOCATE COSTS (4)
Economic
DECISION MAKING
ADD/DROP
product/service/customer
MANUFACTURE
inhouse/outsource
Decide
SELLING PRICE for ONCE-OFF SPECIAL ORDER
Cost
AVAILABLE CAPACITY
MOTIVATE
management & Employees
Make managers
AWARE COSTS IN I FUNCTION AFFECT OTHERS.
Encourage
SIMPLER DESIGNED/MANUFACTURED
products
Reduce
COSTS
Kaisen approach
Sales reps highlight
HIGH MARGIN
products/services
JUSTIFY COSTS
/reimbursement amounts
COST
at
FAIR
price, required by
LAW
reimbursement of eg
CONSULTING %
of cost savings
Measure
INCOME & ASSETS
INVENTORY COSTING
Internal Reporting
External Reporting
Stock valuation & COGS
Taxation reporting
COSTS OF IMPLEMENTATION
Cost v Benefit
Costs incurred: educating managers how to
COLLECT DATA
TIME
consuming &
EXPENSIVE
VISIBLE & EASY TO COST
BENEFITS OF IMPLEMENTATION
Difficult to monitor
eg benefits of pricing decisions
trade off
HOW ALLOCATE COSTS
Affects
no of
indirect cost pools
Choice of
ALLOCATION BASE
IDENTIFY FACTORS
that cause resources to be consumed (drivers)
EQUITY AND FAIRNESS
JUDGEMENT
GOVT
contracts
ABILITY TO BEAR
more
PROFITABLE
can take
MORE COSTS
CAUSE AND EFFECT
Causes
INCREASES/DECREASES
What
CONSUMES RESOURCES
Hrs spent
BENEFITS RECEIVED
Benefits
MOST
COST DRIVER V COST ALLOCATION
COST HIERARCHY
Output unit-level costs
Batch-level costs
Product-sustaining costs
Facility-sustaining costs
INDIRECT COST POOL
DESIGN
Example of Cost = Design engineering costs
Cause & Effect Relationship = size/no of component parts
Cost Allocation Base = No of parts * cubic feet
HIERARCHY: Product sustaining