Project Management – Definition and Important Concepts
Project Management is the art of managing all the aspects of a project from inception to closure using a scientific and structured methodology. The term project may be used to define any endeavor that is temporary in nature and with a beginning or an end. The project must create something unique whether it is a […]
Finland’s Failed Universal Basic Income Experiment
The Scandinavian countries are often seen as role models for welfare states. These countries are known for having very high taxation rates. However, many experts claim that these countries also have mechanisms to ensure that the money collected as taxes is plowed back to the people. Lately, Finland has been in the news for experimenting […]
The Rise of Protectionism and What it Means for Globalization
Globalization gone too far? Many experts believe that the pace of globalization had accelerated so much in the period starting from 1990 to 2007 that the global economic crisis that happened in 2008 revealed the drawbacks of too much integration, interconnection, and interdependence. This is seen by many as the inevitable consequence of globalization going […]
Do Farm Loan Waivers and Bank Bailouts Make for Sound Economic and Fiscal Policies?
Farm Loan Waivers, Bank Bailouts, and Moral Hazards Farm Loan Waivers are the Flavor of the Season as Indian States take turns indulging in a game of who waives the maximum loans taken by the farmers. Indeed, with elections approaching, a form of Competitive Populism has begun wherein each political party is trying to outdo […]
Value Analysis: An Applied Concept for Manufacturing and Service Industry
Introduction All organizations strive to create value for their customers. This value creates mind space for product and services. Value analysis, therefore, is a scientific method to increase this value. Value is a perception hence every customer will have their own perceptions on how they define value. However, overall at the highest level, value is […]
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
