On the traditional cost and operating cost differences

Abstract: Cost management is an important aspect of business management, providing accurate accounting information, corporate reform measures conducive to coordinated, go hand in hand to promote the scientific direction towards the development of business management since the 1990s, the world Many companies have implemented advanced activity-based costing to improve the existing accounting system, to enhance the competitiveness of enterprises, mainly first introduce the basic principles of traditional cost method, the analysis of traditional cost accounting in the presence of a few problems, which leads to the now more popular ideas costing main content.

Keywords: traditional cost; costing; differences

Costs as a resource cost, the enterprise in order to obtain the costs of certain economic benefits, and ultimately receive compensation from corporate income in the income of certain circumstances, the need to compensate for the lower cost, higher economic efficiency of enterprises, so For a long time, the guiding ideology of the traditional cost management to focus on "saving a screw, a rope, an envelope" on, and the cost of lifting as an important basis for assessing the performance of so-called traditional cost management point of view from time to refer to Rubin • Cooper and Robert Kaplan • Founded in 1984, ABC (Activity-Based Costing) before various cost management system. Costing in accurate cost information, improve business processes for resource decisions, product pricing and mix decisions to provide better information, etc., have been widely praised.


A traditional cost of the basic principles

Cost refers to the traditional business support cost-sharing method, the so-called support for the cost of the product or service that supports the completion of the addition to direct materials, direct labor costs beyond.

The traditional method of calculating the cost of the basic principles can be summarized as follows: according to different cost objects imputation production costs incurred during the General is divided into three parts, namely, direct materials, direct labor and manufacturing costs; according to the direct costs are directly charged , included the principle of allocation of indirect costs, manufacturing costs for what happened allocated according to certain criteria included in the corresponding object to the cost of the traditional cost accounting system's main limitation is that it used the volume-based cost drivers, The number of enterprises with different specifications and different complexity of the production of diversified product portfolio, this distribution ratio will lead to inaccurate product costs. Today, many companies use highly automated production technology to meet customers' diverse, small quantities, and can quickly produce high quality personalized strength, variety, small batch products. With the emergence and development of automation technology, production status from "people operating a machine" to "more than one person operation machine. "Thus, the possession of fixed manufacturing costs significantly increase the proportion of manufacturing cost in this case, the requirements of business managers accounting for manufacturing costs for revolutionary change, the focus of cost accounting requirements to shift from direct labor to a reasonable distribution of manufacturing costs in order to improve the accuracy of product costing and cost control effectiveness.


2 Costing (Activity-based Costing)

Activity-based costing (ABC) refers to the operations for the accounting object, through the cost drivers to identify and measure the amount of work, and thus the amount of work to allocate indirect costs based on the cost calculation in the ABC, the operating costs can be divided into four levels of product unit cost, namely ① and production unit for the direct cost, including raw materials, direct labor, etc. The level of operating costs and output is proportional. ② batch production costs, namely the production and packaging batch batch do not do the consumption of resources, including the production of a batch of production required to prepare costs, cleaning costs, quality, cost, etc. The level of operating costs depending on the number of production batches. ③ maintained as wood products, namely the kinds of resources and product cost, including access to a production license, the cost of packaging design, etc. The level of operating costs depending on the scope and complexity of the product. ④ plant-level costs and maintain operating capacity is related to consumption of resources, including depreciation, security Check the cost, insurance, etc. The level of operating costs depending on the size and organizational structure.

(1) operating cost management, the basic idea. Business is a for the final meet customer needs and achieve maximum value and investor returns are closely linked to run a series of collection operations, production and consumption of goods or providing services jobs, job consumption resources, and resource consumption, while the value of the accumulation process, the final goods or services is the set of all operations, but also the full value of the collection. operating chain also showed the value chain. ABC's manufacturing costs involved in a two-stage allocation process; first one stage, the manufacturing cost of production or service operations center each imputation, the formation of operating costs; the second stage, the motivation to work through the operating costs of libraries to the imputation of the cost allocation to products or services, the final cost to be output.

(2) costing costing procedures.

① recognition and measurement of the cost of consumption of corporate resources. Will be able to visually identify a particular product or service for the resource costs classified as direct costs charged directly to the specific product or service costs, and the rest are classified as operating costs.

② recognition and measurement of resource consumption operation. Job is to provide services or products and consumption of enterprise resource management activities related to production, such as order processing, product design, employee training, material handling, machine commissioning, quality inspection, packaging , sales, general management.

③ measurement of operating costs, according to the different ways of consumption of resources will be allocated to indirect costs related to job resources, to calculate the operating costs, that operating costs.

④ Select cost drivers, choose to place the factors that drive costs. A cost driver is often more than one job, the real consumption of resources should be selected with a high degree of correlation Luo and easy to quantify cost drivers for the allocation of operating costs, calculate product cost basis, like: labor hours, machine hours, machine preparation times, product batch number, receiving number, the amount of material handling, order copies, the frequency of inspection, process change frequency.

⑤ library collection costs. About the same cost drivers of the operating costs of the merger to import "the same cost base," such as power and maintenance costs can be classified as a cost base.

⑥ operating costs allocated its formula is:
= Operating cost of a cost-sharing (library) allocation ratio \ number of cost drivers is a product consumed.

⑦ calculate product costs would be allocated a product of the operating costs (library) cost-sharing and direct costs (direct labor and direct materials) combined aggregate, calculate the total cost of the product, then the total cost compared with the number of products, calculate the unit costs.


3 Costing and cost comparison of traditional

(1) limits indirect costs differences.

In the traditional cost method, indirect costs refer to manufacturing costs, the economic content, and production products include only the direct and indirect costs related to the management and organization of the whole plant for the production, marketing products and raising production capital expenditures as period costs in the operating cost method, product cost is the full cost of all expenses as long as reasonable and effective, are beneficial to the final business value of expenditures should be included in the cost of production. with its emphasis on rational and efficient expenditure, regardless of whether the production of its direct and indirect related in this case, all expenses for the period of imputation is unreasonable, ineffective spending.

(2) the accuracy of the information differences.

Traditional cost method to calculate the cost of the main purpose is to assist departments in an imputation of the average manufacturing cost of the distribution of a linear way to each product, without considering the actual production cost of product consumption and the ratio of the problem, only a " absolutely accurate "(absolute inaccu2racy) information. costing information to calculate the cost of the product can be regarded as a relatively accurate (relative accuracy) of information. costing allocation of indirect costs when the focus on costs, the cost of the source, will the allocation of indirect costs because these costs with the resulting link in the allocation of indirect costs, choose a variety of allocation criteria (cost drivers), so that costs can be attributed to greatly improved, and according to human standards reduced the proportion of indirect costs allocated to a minimum, improve the accuracy of cost information, if the cost of the product as a bull's-eye, costing although this can not always hit the bull's-eye, but was able to consistently hit the target and the outer ring.

(3) production management and quality management differences.

Under traditional cost management system is a production from front to back push production system, namely the production from raw material into the first production process, after the completion of the first semi-finished products into the process to the second production process, and so step by step, until the final formation of the finished product, thus the cost of traditional quality management generally will focus on semi-finished and finished product quality testing, and problems promptly repaired or removed.

The operating cost method of production management system is generally in-time production systems, with conventional production is different from back to front pull a backstepping-like production system, the production process of interlocking, convergence is very close, improve efficiency and profitability, but also allows businesses to reduce inventory costs caused. Costing under the quality management from "cradle to grave 'total quality management (Total QualityControl, referred to as TQC), requires each stage of production workers self-production of the good pass, the quality of self-monitoring, waste found defective, immediately corrected in the production process.

Links to free download http://www.hi138.com (4) differences in distribution of baseline characteristics.

The major single cost of traditional labor hours and other financial variables as basis to allocate the expense of a good non-financial variables, thereby losing some of the favorable opportunity to improve corporate governance. Costing allocation base is diverse, not only emphasized such as labor hours, machine hours, production quantities, the product of the number of parts and other financial variables, such as process change orders are also stressed, adjustment frequency, the transport distance and other non-financial variables using multiple allocation basis, to improve the product and its actual consumption costs correlation, so deep into the operational management level, to eliminate the "non-value added operations," improvement "value-added operations," increased "customer value."
(5) apply the differences between the conditions.

Traditional cost method for single product structure, manufacturing costs are relatively small amounts, and its occurrence and direct labor costs are in fact related to labor-intensive enterprises. Costing generally applicable to a larger proportion of indirect costs, product variety range of complex production processes, production and business activities are very complex, better implementation of the in-time production systems and total quality management system, management of the cost of traditional computing systems are not satisfied with the accuracy of information technology, capital-intensive .


4 Conclusion

Costing a fundamental solution to the shortcomings of traditional cost. Operating costs compared with traditional costing, allocation base (cost driver) took place not only quantitative but also qualitative change, it is no longer limited to the use of traditional cost calculation The basis of allocation of a single number, instead of using multiple allocation basis; it is not only limited to the multi-distribution basis, and financial variables and financial non-financial variables in one, and with particular emphasis on non-financial variables (the number of product parts, ready to adjust the number of transport distance, time, quality inspection, etc.) that quantitative and qualitative, financial variables and non-financial variable combination of distribution-based, due to increased consumption of its actual costs and product relevance, operational costs can make a "relatively accurate" product cost information.

However, the operating cost method does not satisfy the information needs of cost management Souls magic, similar to the existing method, its value also depends on the environmental conditions, to keep in mind is: is still costing provide historical cost information, only indirectly associated with the management decision-making, so in order to play a role in decision-making must be attached. In addition, the operating cost method, while greatly reducing the cost of current methods of calculating the product distribution on the subjective, but not fundamentally eliminate them, In other words, as the basis for costing information is not allocated any of the effects of addition, the costing of the core content of the cost of imputation in terms of library and selection of cost drivers, activity-based costing can not be perfect. In summary, the costing of the theory into practical operation can not completely avoid some common problems of cost, which inevitably was for the distribution of color, which is costing the development process in the future the need to constantly improve Department.


References
[1]  Han Yanhua. Activity-based costing and traditional cost accounting and their connection [J]. Modern shopping malls, 2007, (2).

[1]  Chen established the traditional concept of cost management needs to change [J]. China Agricultural Accounting, 2006, (5).

[3]  Chen Jia. Operating cost management in terms of cost and profit management innovation [J]. Friends of Accounting, 2004, (3).

[4]  Li Xiaoyan. Activity accounting for the cost of the traditional accounting concept of breakthrough [J]. Accounting magazine, 2003, (10).

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