There are a number of benefits associated with life cycle costing. (a) The life cycle concept results in earlier actions to generate revenue or to lower costs than otherwise might be considered. (b) Better decisions should follow from a more accurate and realistic assessment of revenues and costs‚ at least within a particular life cycle stage. (c) Life cycle thinking can promote long-term rewarding in contrast to short-term profitability rewarding. (d) The life cycle concept helps managers
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COST AND MANAGEMENT ACCOUNTING Target Costing at Toyota Akriti Kapoor 11PGDM003 Section A Introduction There are numerous differences between management practices in Western companies and companies in Japan. One of the main differences is related to cost reduction. A manager in Europe or the United States generally expects to use cost information to make decisions about pricing and investments‚ while a Japanese manager expects to use cost information to control costs. Toyota uses cost
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INTRODUCTION Gone are the days when “buyer beware” was the trend. The sellers used to dictate their terms as the competition was less. But after the Liberalization‚ Globalizations and Privatization in 1991‚ more companies entered into India. This changed the situation form “Buyer’s beware” to “Sellers beware”. It became more difficult for the companies to sustain in the cut throat competition. They had to shift their focus from product centric to customer centric. Companies had to think smart instead
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between ABC Costing and the Time Driven ABC Costing Activity Based Costing (ABC)‚ is a method used to gather an estimation of the cost of a product or service. It was proposed by Robert S. Kaplan and W. Bruns. It helps to assign costs to products and services‚ of an activity along with the resources‚ based on the consumption that takes place by each product or service. The model helps companies in deciding that which products are not rightly priced and which products are actually costing more or are
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Marginal Costing is ascertainment of the marginal cost which varies directly with the volume of production by differentiating between fixed costs and variable costs andfinally ascertaining its effect on profit. The basic assumptions made by marginal costing are following: - Total variable cost is directly proportion to the level of activity. However‚ variable cost per unit remains constant at all the levels of activities. - Per unit selling price remains constant at all levels of activities. -
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Variable costing and absorption costing are the two most commonly used methods of inventory costing for manufacturing companies. The inventory method of variable costing takes place when total direct and indirect variable manufacturing costs are included within inventoriable costs. Fixed manufacturing costs however‚ are considered costs of the period under variable costing. The next method of inventory costing‚ absorption costing‚ includes all variable manufacturing costs as well as fixed manufacturing
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Absorption and Variable Costing‚ Inventory Management Absorption and Variable costing are very important tools for cost accounting. Both of these costing methods allow you to see the cost of your inventory‚ in a different way. For example the absorption method allows you to assign all costs to the product‚ while variable costing allows only variable costs to be assigned to the product. Inventory management is extremely important as well because it ties into efficiency and lowering your costs
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Quality cost measurement under activity-based costing Wen-Hsien Tsai National Central University‚ Chung-Li‚ Taiwan‚ Republic of China Introduction Many companies in the world gradually promote quality as the central customer value and regard it as a key concept of company strategy in order to achieve the competitive edge (Ross and Wegman‚ 1990). Measuring and reporting the cost of quality (COQ) is the first step in a quality management program. Even in service industries‚ COQ systems receive considerable
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5-47 ABC and TOC Discuss the similarities and differences between activity-based costing and the theory of constraints‚ as well as situations in which one approach might be preferable to the other. 5-48 Cycle time efficiency and JIT Walker Brothers Company is considering installing a JIT manufacturing system in the hope that it will improve its overall processing cycle efficiency. Data from the traditional system and estimates for the JIT system are presented here for their Nosun Product:
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Activity Based Costing can be defined as an accounting methodology that assigns costs to activities based on their use of resources‚ rather than products or services. This enables resources and other associated costs to be more accurately attributed to the products and the services which they use. It doesn’t change or eliminate any costs; it provides detailed information about how costs are consumed. (Online manager-net.com). Traditional cost accounting looks at what is spent‚ while ABC methods
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