Looking beyond BRICS for the Next Economic Hotspots
Looking Beyond BRICS: The MINT Grouping The BRICS or the acronym given to the grouping of Brazil, Russia, India, China, and South Africa in so far as promising economic growth is concerned, has now reached a stage where global investors are on the lookout for the next emerging economic hotspots. Indeed, for much of the […]
Building Knowledge-Driven Decision Support System and Mining Data
“Knowledge should be shared. It only grows by sharing.” This phrase finds its importance in today’s highly competitive and economically turbulent business world. Unless knowledge is shared among employees, it doesn’t take an organization anywhere. It’s important to share and manage it, in order to foster innovative thinking, develop and train employees and evolve into […]
The Drivers of the BPO Phenomenon: Globalization, Economics and Geopolitics
The main drivers of the BPO phenomenon are globalization, economics and geopolitics. To elucidate, ever since the global economy started getting more integrated and interconnected, there has been a concomitant movement towards opening up of the economies of the developing countries to greater interaction with the west. This “flattening of the world economy” has meant […]
Documenting a Process – Importance and Its Benefits
While improving business processes, it is essential that one document the process as well as any improvements made to it. Most consultants will document both the “As-Is Process” as well as the “To-Be Process”. While many think about it as customary and do it for the same reasons, there are other important reasons to document […]
Check Sheet – A Basic Six Sigma Tool
A check sheet is a simple tool that was once a part of the seven basic tools of six sigma. It is said that check sheet has become obsolete because of the introduction of software which have the capability to record high volumes of data and present them in a format as required. The check […]
The costing module is one of the important controlling modules which enables effective internal cost control and accounting. All functionalities regarding cost analysis and cost allocations are provided by this module. The cost accounting module is highly integrated with budget and general ledger modules as well as draws input and provides output to various logistics modules such as sales, procurement, warehousing, shop floor and bill of materials.
Cost Accounting module: Cost accounting module consists of following functionalities:
Overhead Cost controlling: Overhead cost, which is an indirect cost, can not be directly assigned to the products manufactured or services rendered. Sometime, overhead cost is a significant percentage of overall cost. This functionality helps in defining allocation relations in the form of surcharge/rate applicable to various cost centers which in turn is comparable to budgeted surcharge/ rates. The overhead cost control thus helps to monitor and allocate of indirect cost.
Cost price calculation: Under cost price calculation functionality, simulation (such as to make or subcontract), and calculation of price for standard and customized items are performed. This functionality is crucial in determining the lowest price limit for which a product is profitable. The cost price for standard item is calculated based on the following:
For calculation of cost price for customized items, project specific rates and surcharges are applicable. Cost price calculation also forms basis of calculation of valuation price (where a surcharge is added such as warehouse transfer surcharge) which in turn is used for internal financial transactions such as inventory transfer, Work in progress inventory. Sales price or suggested retail price where a sales price surcharge is added to cost price is also derived from this functionality.
A typical flow chart for calculation of cost and sales price is as follows:
Hours Accounting: This functionality is used to account for employees and machine cost and charge these costs to appropriate production orders. Hours spent can either be entered directly or the system can automatically back flush an estimated hour, on completion of an operation. When hours are posted, financial transactions are created in general ledger. Hours accounting is normally done through a working timetable and normal and overtime rates can be defined in the system. It is also possible to enter estimated/budgeted number of working hour for an employee or a work centre for a particular period (such as month/year) and compare the estimated/budgeted hours with actual hours.
Activity based costing: This is an extension of traditional system of distribution of overhead allocation, where only a few allocation bases are used. This functionality helps in controlling cost objects (which may be anything like products, services, projects, distribution channel) with their cost drivers, through a bill of activities and activity results. Thus, this functionality determines the consumption of business process by products, customers and other cost objects based on the cost drivers and helps in monitoring and controlling cross departmental business process.
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Configuration Control and Setting Up of Base in ERP System
February 12, 2025
