Page 276 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes
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Case Study Process Costing and Optimization to Avoid Losses
T o improve efficiency and reduce costs you need to streamline processes, remove or
reduce non value adding activities, and solve problems that cause extra costs.

By using Activity-Based Costing and process Management you’ll get insight into
the cost of processes and activities, and what drives those costs. This information is
essential if you want to make changes that result in measurable cost savings and improved
efficiency.
The prodacapo software solutions for activity based management and process management
enable you to:
z z Measure and analyze costs and number of full time employees (FTE) per activity and
process

z z Prioritize which process improvements or cost reductions will be most beneficial
z z Identify non value added activities and decide how to improve them

z z Benchmark your business units and identify best practices
Once you’ve made your changes, you can follow-up to make sure costs don’t rise or
performance decline. By continuously measuring the unit cost of processes and activities
you’ll be able to manage efficiency and take steps if costs increase.
prodacapo process Management is a powerful solution for process costing and optimization.
It uniquely combines both process mapping and process costing functionality in a single
solution and helps you achieve measurable results quickly.

Use the Prodacapo solution for ‘stand-alone’ projects, for process optimization and cost reduction,
or “turbo charge” other process improvement initiatives such as Six Sigma and TQM.

13.5 Summary

z z process costing is also one important method of costing. It refers to costing of operation(s)
or process(es) involved in converting raw materials into finished goods or products. Its
main objective is to provide an average cost of product.

z z process costing represents a type of cost procedure for continuous production industries.
z z In such industries, output consists of like units, each unit being processed in the same
manner.

z z Therefore, it is assumed that the same amount of raw materials, labour and overhead is
chargeable to each unit processed.
z z The products or goods are standardized.

z z When a product is produced through various processes, the output of each process in
transferred to the next process and that of last process is transferred to the finished goods
or finished stocks.

z z In each process, there is a residue left after transfer of the partially completed product to
the next process. This is not wastage as it can be sold in the market but the quantity of oil
produced plus the quantity of cake left will not equal the quantity of oil seeds. It will be
slightly less. The quantity not accounted for is a loss and effort should be to keep it as low
as possible.

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