Do you remember when it was only the only company you potentially seen in your work when it was only a week in your garage and in a single manufacturing job? The cost reduction for you was simply doing the job as quickly as possible with the lowest possible financial investment and no inventory at all. Let's talk about "just in time" production. It was often more than "just in time" when it came to another work plan to keep electricity or bread on the table.
How things have changed when you grew up to 60,000 square feet of staff, employing 80 staff, and dozens of daily awards. As for a simple costing formula (eg Price – Financial Cost = Profit), there are so many variables that you can decide on your head. Of course, he would not have come to this point without gradually improving the cost of work. You understand that costs contain more than materials; include floor planes, auxiliary needs, additional crew, benefits for such staff, and countless other concepts that have not been taken into account in the garage days.
Depending on the type of job, order, or inventory, cost accounting methods can be divided into three different approaches: Work Cost Calculation, Process Cost, and Activity Based Costing. In the most basic terms, these methods are:
- Job Order Costing : Costs are allocated to specific tasks or orders. This method monitors costs, 1) tracks materials and works directly for a job; and 2) a predetermined cost factor for each job should be used to include costs that are not directly related to the work. Workplace placement costs are the most common in workplaces, specialized production, or the service sector.
- Process Cost Calculation : Manufacturing costs are assigned to products to determine the average cost per unit. Process costs are used by companies that produce bulk or similar products; ie continuous production. For each unit that is roughly the same amount and each gets the same amount to get the production cost. The more repetitive and continuous the production the better. Examples of operations that use procedural costs include heat-shrink packaging manufacturers, refineries, paper mills, and so on.
- Cost-based Costing : Many people know that acronym, ABC, activity-based cost sharing (or pool) is the cost of shared activities ( cost drivers distortion of costs resulting from the arbitrary assignment of indirect costs in normal workplace costing (ie overheads)
Ultimately, the type of cost reduction you use depends on the type of production. budget reports, many government and financial institutions insist on ABC from vendors. If you produce thousands or thousands of pieces of the same refrigerator magnets after a large batch, then probably the cost of the process is likely to cost you. on the other hand, if a plant that produces different products over time, but with the same production lines, more accuracy is needed to determine what incentives the costs of labor sharing and through other related operational aspects. go ABC.
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