After Activity Based Costing

 

The more and more common awareness of the lack of a precise procedure useful for costing allocation made financial advisors consider other solutions.

Instead of selecting best drivers, managers have to set in the strongest action for reducing overheads: that only means indirect labor costs are transformed into direct costs.

In particular, blue collars (or staff working to a specific project) should fill in a scorecard where their activity – tied to a number of products – is promptly entered in terms of tipology, number of hours spent, destination, etc. That’s the so called “time reporting”.

As long as managers have to do their best to implement the highest organizational strength, workers will be requested to have daily care of exact records.

At the same time, some managers wouldn’t be able to streamline Cost Accounting System because of the alone consideration of the labor costs: if controller had to allocate other overheads such as workplaces, machineries or services, he would be allowed to overlook things – according to their minor importance compared to total expenditure – or choose again between traditional full costing and ABC.

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