Advantages And Disadvantages Of Costing Systems

Actual costing is rarely used because managers can’t wait until the end of the year to obtain product costs. Information about product costs is needed as the year goes for planning, control, and decision making.

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

Organisational life cycle is extremely important for an organisation to understand and to be able to apply it to each of the products or services that it provides.

Life Cycle Costing (LCC) is an important economic analysis used in the selection of alternatives that impact both pending and future

The concept of life cycle studies has been developed over the years, mainly in the

Narong, D. K. (2009). Activity-Based Costing and Management Solutions to Traditional Shortcomings of Cost Accounting. Cost Engineering, 51(8), 11-22.

With the goal to minimize the effects on the environment many companies have improved by using the LCA as a tool to consider the entire life cycle of a product (Curran 1996). LCA shows cumulative environmental impacts from all stages of the products life often including impacts not considered in more traditional analysis like raw material extraction or material transportation. This provides a comprehensive view of the true environmental tradeoffs of the product and process selection. Figure 1 illustrates the possible life cycle stages that can be considered in an LCA and the typical inputs/outputs

Process costing is an easier system to use when costing homogenous products compared to other cost allocation methods. Each process applies direct materials, labor and manufacturing overhead to the production cost total. Management accountants take the total number of goods leaving the process and divide the total process cost by this number. This creates a simple average cost for each item produced. Another advantage is that business owners use process costing because it creates a flexible production process. Companies needing to refine their process can simply add or remove a process as necessary. This also allows companies to lower their production cost for each good. Adding a process allows companies to produce slightly different goods or improve product quality. This flexibility ensures companies can produce at the most competitive cost in the economic marketplace. Also process costing provides an approach to allocate costs to

Inventory analysis is the data collection portion of a LCA and includes a quantified list of all inputs and outputs involving the entire life cycle of the concerned system. LCI involves estimating the energy and materials consumed by the system, the energy efficiency of the system’s components, and the emissions to air, land, and water by variant processes and components of the system. The process of data collection is the most time-consuming and resource-intensive step of the LCA. The reuse of data from other studies can simplify the work; however, assuring the data are representative is essential. LCI can be utilized to discover improvement opportunities and determine life cycle stages that present the most and least detrimental impacts [4].

*It reduces cross-subsidization of the different products, including the standard versus non-standard ones, thus arriving at more accurate costs and better analysis of profitability.

Life Cycle Cost (LCC) is the total lifespan cost incurred by an organization in purchasing, installing, operating, maintaining, and disposing off any equipment used in daily operations of the firm. In regard to this, estimation of LCC encompasses using a particular approach in identifying and quantifying components of an LCC equation (Pehnt, 2006). The use of LCC as an assessment tool when selecting possible design alternatives results in the provision of a cost-effective solution within limits of available data. In addition, a standard LCC comprises initial and operation costs, installation and commissioning costs, energy costs as well as disposal costs among others.

Life cycle cost analysis (LCCA) is defined as a method or a financial tool to evaluate the total cost of facility ownership, which include time period and discount rate by using discount cash flows. For example: maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs. Net present value (NPV) and internal rate of return (IRR) are considered all possible cash flows and they generate financial metrics of LCCA. Life cycle cost analysis is used to evaluate energy efficiency measures (EEMs) for building design and it is only considering the capital and energy costs. A simple payback analysis is defined as “the process of determining the capital cost and energy cost savings

C. T. Horngren, A. Bhimani, S. M. Datar, G. Foster (2005), 'Activity-Based Costing', Management and Cost Accounting (Prentice Hall Europe), 345-363

Introduction: Every new product or development made by man has an impact on environment. Growing environmental concerns has made it necessary to quantitatively study these factors. Life cycle assessment (LCA) is one such tool devised for calculating the overall environmental impact of a product or service. It includes defining aim and scope of assessment, inventory analysis, impact assessment and deriving conclusions. Life cycle inventory (LCI) is a part of LCA and involves direct collection of input output data from the system. Quantities like material/resource consumed, energy utilised fall under inputs while energy and by-products released are considered outputs. Life cycle impact analysis (LCIA) consists of

Process costing is a system which mostly practices by a company whereby the manager of the company wants to know the cash flow from one department to another. Process costing give a clarify information to managers, therefore this activities is very important.