The objective of this study is to critically analyze the use of standard costing and production as a method of control in a world characterized by globalization. The study will also discuss the shorter product life cycles and increases in consumer wealth ( 1991). The traditional cost concepts can be easily defined by the terminologies utilized in the American industry by laborer and managers in the field of production, engineering, marketing and accounting activities. The transformation of these concepts is the results brought by the global competitive market. Technology brought by computers also has a great impact and have it necessary to new cost concepts and terms as well.
To have an in depth understanding of standard costing production, the three major aspects of businesses must be thoroughly discussed: manufacturing, merchandising and service industries (, 1990). The manufacturing firm merges and consumes economic resources to produce a finished product. Merchandising companies, such as wholesalers and retailers, offer the middleman job of getting the manufactured product to the consumer. Service industries give services as an alternative of manufacturing a product. Even though there are major disparities in the roles performed by manufacturers and by merchandising or service firms, the terms and concepts of managerial accounting apply equally well to all industries ( 1990). Only the methods and format of presentation may differ. Examples of the industrial groups include:
· Manufacturers
a. Mining
b. Industrial goods
c. Consumer goods
d. Construction
· Marketing
a. Wholesalers
b. Retailers
c. Brokers
d. Warehousing and transportation.
· Service Industries
a. Recreation and personal care industries
b. Health care: hospitals, nursing homes, clinics
c. Information systems: computers, word processing
d. Government agencies: federal, state, local
There are significant implications to modify the priorities on managerial accounting. The production-line manufacturing industries are supreme for a highly prepared standardized cost accounting systems move toward. The service and marketing industries are not ( 1990). They need an importance on decision-making techniques that are elastic and timely. Marketing comprises demand-creating and demand-servicing activities. The demand-creating activities are called promotional and include advertising and selling functions. The demand-servicing activities are called logistics or physical distribution and include all physical movement functions from the production line to the ultimate consumer. Contemporary cost systems have not yet content the informational necessities of the marketing career. Marketing managers are repeatedly asking for accounting expenditure classifications that will augment their decision-making capability (, 1994). There will continue to be a growing insists for managerial accounting methods in the field of marketing. In the managerial accounting of Toyota, the company does not put emphasis on the capacity, timing, and recording of costs, however on the understanding and analysis of cost data for decision making. The effect is that a wide variety of descriptive adjectives have developed in managerial accounting to allow for more precision in the interpretation of the data. Each adjective used with cost gives it a more precise meaning ( 1990).
The company’s cost has been defined as a sacrifice of resources incurred for a future benefit or objective. The resources that are sacrificed are in the form of cash or cash equivalent, such as payment in kind, or the incurrence of a liability. Toyota is expecting the future benefit that refers to assets such as inventory, machinery, equipment, property, and intangibles ( 1990) . The expenditure for a future benefit (asset) that lasts only during the current period is a cost that is expensed. For example, the cost of office supplies used in the current fiscal period is classified as an expense because it does not have benefits that carry over to future fiscal periods.
Toyota is also implementing a cost objective, that is a product for which the total or unit cost is to be determined. A cost objective may be the product manufactured or the service performed, or it may be a department, a process, or a function, all of which are referred to as cost centers ( 1991). The cost center is the smallest unit for which costs are accumulated for reporting and analytical purposes. Since Toyota is a traditional Japanese company, they are still implementing the traditional cost accounting systems utilized in the United Kingdom and are being challenged by corporate financial and production executives and by professors of both accounting and production management ( 1987). A major controversy over the relevance of the traditional cost accounting systems has emerged. There are two opposing viewpoints, one that points directly to the traditional cost accounting system as a major contributor to the diminution of productivity in selected U.K. industries, and the other viewpoint that the cost accounting system is not a direct cause of production problems. Those who support the first position propose a major overhaul of traditional accounting systems in order to solve production problems resulting from world-class competition ( 1987). Those who take the opposing viewpoint are convinced that the production systems need the overhaul and that the traditional accounting systems cannot directly cause production problems. They point out that management accounting cost systems is already flexible and custom designed so that only minor tune-ups are necessary to accommodate the changes brought about by world-class competition. The key characteristic of the direct cost Toyota is traceability to the cost object, such as the product (, 2005). In the traditional financial accounting system, only direct materials and direct labor are assumed to be traceable to the product. A computer-integrated manufacturing system (CIMS) incorporates production changes that make it possible to trace some overhead directly to the product. There is one significant change in cost accounting that may be necessary because of the pressure to change the production process; the change is in the definition of overhead (, 2005). At present, all factory overheads are assumed to be indirect, not traceable to the product.
In the case of Toyota if some of the overhead costs under CIMS production processes can be directly traced to each product line, then overhead should no longer be assumed to be inherently indirect, and should be divided into direct overhead and indirect overhead (, 2005). Direct overhead is that which can be traced to the product just as direct material and direct labor. Indirect overhead will have to be allocated to product lines as before. This concept is not new, but it has not been emphasized or foreseen as a panacea for the problems created by the pressures to change the production process
The following list describes the most important objectives of computer-integrated manufacturing systems of Toyota ( 2005):
· Increase product quality.
· Shorten the time required for non-value added activities, for example, machine set up time.
· Reduce inventory levels and push-through versus pull-through methods.
· Develop flexible manufacturing systems where feasible.
· Work toward a fully integrated and coordinated production system operated by a centralized computer.
Although Japanese automobiles and electronic equipment are noted for their high quality, it was not long ago that “made in Japan” was a synonym for cheap and breakable. After World War II, the Japanese borrowed many industrial techniques from the United Kingdom, and while the U.K. manufacturers were enjoying a seller’s market and built obsolescence into their products, the Japanese and European countries began to improve quality (,1990). Some U.K. manufacturers have fallen behind their foreign competitors and must improve quality. Major efforts to improve quality have been made in the automobile industry and other highly competitive industries. A major objective of the new manufacturing environment is to improve quality. The computer-integrated manufacturing system (CIMS) and its related technological changes provide the means for improved product quality.
Toyota tries to preserve its homegrown economic model such as the values it practices in its business practices to be able to retain their competitive advantage ( 1990). Indeed, it is a hard task for the company to preserve its locally conceptualized model while maintaining linkages with the global economy. However, because critical success factors are established as key aspects needed by a company, this has become easier in dealing with the issue of globalization.
Although the core values which have distinguished the management of Toyota is still retained, the company has stepped out to shine for the rest of the world ( 2005). The latest developments in the company proved that it is stronger than ever, emerging victorious from otherwise discouraging situations such as the adverse effect of the strong yen. The company had a strong financial performance with increased net earnings of .2 billion and increase global sales by 9.9 percent. This has narrowed the gap with General Motors and tied with Ford which gives credence to predictions that the company will take over as the world’s largest automaker by 2015
During the past two decades, major advances have been made in production technology. Particularly in the 1980s, the microcomputer and its software, the Japanese economic and cultural explosion, and the expansion of worldwide competition have contributed to hastening technological change in U.K. heavy manufacturing industries. The motivation for technological change is survival. United Kingdom companies no longer dominate the world markets. Toyota is no longer the largest corporation in the world. Several Japanese companies have replaced it (, 2005). The three situations that follow illustrate the effects of changing production technology on the cost analysis and control system. The first situation represents the traditional production and cost system, which is labor intensive. The second situation represents the introduction of automation, but no change in the cost analyses and control system. The third situation represents the most advanced technological changes in production accompanied by changes in the cost analysis and control system. The purpose of the illustration is to reveal the positive and negative effects of production changes on the costing system and to demonstrate the specific changes in the costing system that are necessary to support effective management decision. It has become popular to blame the costing system for the lack of relevant cost information ( 2005). Cost analysis and control systems are instituted by top management in contrast to financial accounting reporting systems, which must adhere to GAAP rules and regulations. If management wants more specific cost data they must be willing to pay for it. The illustrations reveal the necessity for more detailed and accurate cost tracking under more automated production systems. In all three situations the company has multiple product lines.
References
Credit:ivythesis.typepad.com
0 comments:
Post a Comment