Advantages of German Cost Accounting Software

Management Cost Accounting

Summary

Management Cost Accountants are those help to improve the efficiency and effectiveness of a business performance, whereas the regulators such as the financial analysts and auditors are the players who check the scorekeepers at a bridge game. It is a such a complicated process that some players get distracted and concentrate on keeping score rather than playing the game, metaphorically speaking.

The efforts of financial managers to improve the organization management and measurement over the years have not been up to the mark. Inefficient implication of ABC, performance measurement and other initiatives have left the CFO’s under a lot of pressure.

As a result, it is high time for the Management Accountants; to make dynamic and meaningful changes in their role of providing information to managers to enable excellent business performance, which involves learning from US management accounting experiences and combining successful practices from around the world.

GPK is very different from the US standard costing, where it is utilized in the manufacturing process, and direct material and labor are added along with manufacturing overhead. It is not the same with GPK, where it is more closely related to marginal costing but with characteristics of ABC ; as it is related to the manufacturing process and its supported departments.

In GPK, cost centers are designed in such a way, that it revolves around a single activity where each department has only one cost driver. As a result, the cost centers accomplish the same thing as ABC attempts to do. This will result in, a single manager having multiple cost centers reporting to them, but a manager under ABC will manage cost center that produces multiple activities.

Advantages in German Cost Accounting software will make it possible to have cost centers consolidated and in addition to have multiple subordinate cost pools, each with an individual assignment driver. However, when these are used; it is important to analyze cost by resource output. This becomes almost like the ABC system.

An important aspect is the way in which cost are determined and examined to be either fixed or variable, which depends on the output quantity of the chosen cost driver. As variable cost is variable to the unit of output of the cost center activity and not the total quantity of the final products produced. Whereas, fixed cost is distributed as distinct and separate component based on the portion of the planned total test.

Opinion

Management accounting is essential part of an organization as it looks forward to the future of the company which helps in decision making and controlling.

In my opinion, GPK and PK should go hand in hand which helps the organizations to make much more integrated decisions that would help them in the long run.

GPK is adequate in the administrative and non-directive cost controllers. It is ideal to combine the aspects of both GPK and ABC with disciplined methodology, and competent software will satisfy the needs of the US companies.

ERP software implementation leads to better decision making which help in support, planning and controlling methods. GPK should be implemented more is it helps company control the overall cost in managerial matters and helps reduction of money. Analysis should be implemented with more importance as it helps managers in making informed decisions, as they are exposed to cost transparency.

Managers should understand that GPK and ABC should go hand in hand as it helps analyze indirect cost such as fixed cost in operations and support department in order to improve product and service cost profitability

German Cost Accounting

Summary

In GPK cost centers are designed in such a way, that each center revolves around one activity, where department has only one cost center. In a manner of speaking, activity specific cost center accomplishes the same thing as ABC, where cost centers are identified by organizational grouping. This means that in a GPK, a single manager may have multiple cost centers reporting to them; but in an ABC, a manager will have a single cost center that produces multiple activities.

The emergence in German Cost Accounting software make it possible to have cost centers grouped, and to have multiple subordinate cost pools each with an individual assignment driver. When these subordinate cost pools and drivers are used it is necessary to analyze cost by resource output. This would look almost like the ABC, although the premise for arriving at the solution is one that starts from a resource centric approach.

Cost center managers are expected to manage cost to ensure spending is equal to the sum of target cost plus budgeted fixed cost. As a result, GPK encourages spending performances to be as realistic as possible. As volume variable cost components are flexible to consider actual quantity produced, analysis of volume variances become more refined in order to address actual operating rates of consumption.

Managers are expected to monitor spending and volume of output during each month and reduce or increase resource availability. The same methodologies that are used in cost centers are also used in production-order costing. Each order absorbs direct cost such as material plus cost from cost centers such as machine hours consumed. The variations in calculation performed on the cost center are also performed on the order and the differences are passed into the contribution margin for the product

Opinion

Although GPK and ABC should go hand in hand, it has been shown that GPK has achieved more than what ABC has done for a significant number of years.

There should be a clear distinction between management accounting and financial accounting, where management accounting is understood to be a different science which shows that each has its own career development path.

Integration should be made into measurement and management systems for planning and controlling the business which is accomplished by cost planning at the cost center level.

There should be more use of the pull logic in the aspects of planning and control as in the design of cost center and output relationships. IT systems should be evolved to support the applications of these management systems even when incorporating the ABC or PK model.