dynamic costing Troels Troelsen

Troels Troelsen Dynamic Costing Download free books at Download free eBooks at bookboon.com 2 Troels Troelsen Dynamic Costing Download free eBooks at bookboon.com 3 Dynamic Costing 1 st edition © 2006 Troels Troelsen & bookboon.com ISBN 87-7681-151-4 Download free eBooks at bookboon.com Click on the ad to read more Dynamic Costing 4 Contents Contents Dynamic Costing 6 Preface 7 1 Introduction to Costs 9 1.1 Introduction 9 1.2 Dierent Cost Denitions 14 1.3 Fixed Costs vs. Variable Costs 18 1.4 Separation of Fixed and Variable Costs 22 1.5 Other Costs Distinctions Relevant for Decision-Making 27 1.7 e Management Job 40 1.8 Assignments for Chapter 1 43 www.sylvania.com We do not reinvent the wheel we reinvent light. Fascinating lighting offers an infinite spectrum of possibilities: Innovative technologies and new markets provide both opportunities and challenges. An environment in which your expertise is in high demand. Enjoy the supportive working atmosphere within our global group and benefit from international career paths. Implement sustainable ideas in close cooperation with other specialists and contribute to influencing our future. Come and join us in reinventing light every day. Light is OSRAM Download free eBooks at bookboon.com Click on the ad to read more Dynamic Costing 5 Contents 2 Cost Functions 47 2.1 Cost Functions in the Short-Term 48 2.1 e North Sealand Raspberry Plantation 52 2.2 Easymap 56 2.3 e Printing House 58 2.2 Assignments for Chapter 2 62 3 Dierent Cost Types as a Function of Dierent Decision-Making Situations 66 3.1 Introduction 66 3.2 Examining Dierent Cost Types 67 4 Calculations 74 4.1 Introduction 74 4.2 Dierent Calculation Models 86 4.3 Activity Based costing 90 4.4 Assignments for Chapter 4 102 5 Guiding Solutions 104 5.1 Guiding solutions for chapter 1 104 5.2 Guiding solutions for chapter 2 110 5.4 Guiding solutions for chapter 4 118 Notes 124 360° thinking . © Deloitte & Touche LLP and affiliated entities. Discover the truth at www.deloitte.ca/careers Download free eBooks at bookboon.com Dynamic Costing 6 Dynamic Costing Dynamic Costing 1 Costs dened in a dynamic perspective with decision making as objective “You cannot formulate one universal cost term, you have to establish dierent cost terms and measures for dierent purposes” John Maurice Clark 1923 2 “Producing a good requires an eort of resources that usually has a price. is consumption of resources is called costs. To produce a specic good with the lowest possible cost is a decisive factor for the long-term success of a business. erefore, it is important to be able to establish costs in order to obtain the relevant management information necessary to achieve the lowest possible production costs. Achieving the lowest possible costs is a holistic job, involving management, business culture, optimal technology, optimal internationalization, optimal size of production, etc. And costs vary with the relevant decision occasion. is is the dynamic perspective.” Troels Troelsen 2003 “By denition, a cost is considered to be relevant if it is aected by a management decision. Any cost not aected by a decision is considered irrelevant.” Paul G. Keat and Philip K.Y. Young 2000 3 Author of the book is Troels Troelsen, Course Coordinator Department of Operations Management Copenhagen Business School, 2003 Download free eBooks at bookboon.com Dynamic Costing 7 Preface Preface e objective of operations management is to organize the production and sales/marketing eorts in the most appropriate way for the business. e purpose of a business is to produce a series of goods or services (from this point on, these terms are considered the same and are referred to as goods). It is a deciding factor that this process is achieved as cheaply as possible. • Private business products: A Harboe non alcoholic beer, a box of Legos, a newspaper, a car repair. • Public business products: A full year’s work for a pupil in 7 th grade, a hip operation, administration of nes. e challenge and problem of costs can be described as: 1. Production of a good requires an eort or consumption of resources that in most cases have a price, i.e. a minimal consumption of resources, at the lowest possible price, is essential. 2. is consumption of resources is called costs 3. Producing a specic good at the lowest possible cost is oen decisive for the long-term success of a business. 4. erefore it is important to be able to establish costs in order to obtain the necessary management information, required for achieving lowest possible production costs. 5. Achieving as low costs as possible is a very holistic job, involving management, business culture, the right technology, the right internationalisation, the optimal size of production etc. 6. e cost of producing a good vary in terms of the relevant decision-making occasion, which is the content of a dynamic perspective. A business can, among other things, be described as a string of contracts (nexus, nodes), which combined comprise the fundamental base, the production, and the liquidity access (sales or grants/appropriations). Such contracts (to buy, sell, establish a production facility, hire sta etc.) are commonly agreed upon with contracting entities outside the group of owners and decision makers. It is therefore essential to understand a number of models which place the rm in the context of its environment.