Gpk Accounting
German Accounting - GPK
Leave it to the Germans to develop a costing model based on detail, precision and improving overall control. Flexible Analytic Cost Planning and Accounting (GPK) is a powerful tool, having withstood 60 years of alternative methodologies and widespread hands-on use across Europe. In manufacturing companies, particularly those with a homogenous product line, GPK can be used to define the effects of resource consumption to the bottom line while greatly illustrating to management their marginal cost tiers. The nature of GPK is to show managers what their true production costs are in order to drive strategy. But isn’t that the goal of most other cost accounting methods, such as activity-based costing and Japanese target costing?
By understanding GPK through its applicability, comparisons can be made to these other methods to determine if it is superior, necessary or, indeed, complementary to them. It is quite noteworthy that Andreas STIHL AG & Co., KG, a privately held firm, uses GPK and GAAP-based systems to assist in their corporate strategy. This speaks to the value of a GPK model, which is first measured against a traditional target costing approach.
GPK vs. Target Costing
In broad terms GPK and target costing are similar in that they both are used to drive cost control. It is the extent – or motive - of cost control efforts, however, that contrasts the two. Target costing begins with desired profit margin. A firm identifies the profit required to justify production and subtracts it from the competitive market price to derive their target cost standard. Based on current production costs and capacity levels the company can hone in on their target cost reduction amounts through resource allocation, supply chain management, or product re-designs. Both methods consider customer demand at implementation and, therefore, “pull” costs through production. There is a known standard at which production outcomes are deemed efficient
Leave it to the Germans to develop a costing model based on detail, precision and improving overall control. Flexible Analytic Cost Planning and Accounting (GPK) is a powerful tool, having withstood 60 years of alternative methodologies and widespread hands-on use across Europe. In manufacturing companies, particularly those with a homogenous product line, GPK can be used to define the effects of resource consumption to the bottom line while greatly illustrating to management their marginal cost tiers. The nature of GPK is to show managers what their true production costs are in order to drive strategy. But isn’t that the goal of most other cost accounting methods, such as activity-based costing and Japanese target costing?
By understanding GPK through its applicability, comparisons can be made to these other methods to determine if it is superior, necessary or, indeed, complementary to them. It is quite noteworthy that Andreas STIHL AG & Co., KG, a privately held firm, uses GPK and GAAP-based systems to assist in their corporate strategy. This speaks to the value of a GPK model, which is first measured against a traditional target costing approach.
GPK vs. Target Costing
In broad terms GPK and target costing are similar in that they both are used to drive cost control. It is the extent – or motive - of cost control efforts, however, that contrasts the two. Target costing begins with desired profit margin. A firm identifies the profit required to justify production and subtracts it from the competitive market price to derive their target cost standard. Based on current production costs and capacity levels the company can hone in on their target cost reduction amounts through resource allocation, supply chain management, or product re-designs. Both methods consider customer demand at implementation and, therefore, “pull” costs through production. There is a known standard at which production outcomes are deemed efficient
References: 1. Sharman, Paul A., German Cost Accounting, Strategic Finance, December 2003, pp 31. 2. Krumwiede, Kip R., Rewards and Realities of German Cost Accounting, Strategic Finance, April 1, 2005. Found online at http://www.allbusiness.com/finance/3592029-1.html