Fifo method compared with the average industrial accounting
Methods of reporting cost of production: 1 - average method:
In this way, inventory cost during the construction period of the beginning of the course fees will be added and built on products will be Prorated.
2 - The first sentence of the first incoming method (fifo):
Previously this method, all stock prices during the early period of construction and added costs to complete them separately is shown.
Compare:
Using both average and fifo has certain advantages and does not seem that any of these methods more accurate than another, or be a significant advantage. In general, select any of the methods depend on decision management and business units and the existing conditions shall govern, but the fundamental difference between these two methods in fact related to the goods during the first period of construction is in various offices.
Average cost method for manufacturing the first products during the course material costs, wages and factory overhead, and then added the Drvh Previously a unit cost of goods made to the division shall collect fees equivalent to the completed sections are obtained. But fifo method cost Previously goods during the first period to build a separate and distinct variety of other expenses in the period shown, and the costs it takes to complete the total cost they represent part units is then transfer to a circle.
Meanwhile, one of the problems is that the fifo method if several different cost Previously simultaneously and separately used to give many details in the report need to insert our production cost, which may fifo method and a complex method Please consider incorrect.
Accounting industry - some basic concepts based on tracking cost management accounting activities, and balanced assessment of economic value added, cost-based detection and assessment activities provide balanced information to the managers decision which led to the creation Gyryhayy values need to be. Economic value within the collector"s decision, and performance criteria that Mhrkhayy management to create value is sparking.
For a greater understanding of concepts based on activity cost tracking, and balanced assessment of economic value to the business can be likened to football. Coach a football team to several factors needed for success. For example, to obtain a blow station, to obtain Corner, providing a strong defense and having a good goalkeeper. But the end of the race the only thing that is important is that we won or we lost the game rather than a few corners or hit the station have earned. The business manager for a lot of success criteria is necessary. Activity based cost tracking and evaluation criteria are balanced manager in decision making and help deliver a breakthrough, but there simply because of the use of these criteria is success?
The fact that successfully manage to achieve these criteria requires defining granted, but the company won or lost economic value is economic value added with the use of managers to use information to create value and asked the owners are motivated. Organizations need to cope with today"s dynamic and complex business environment to continue to survive due to the development of competitive markets on the one hand and pressure from other investor meetings managers and explain the criteria for determining the value of accurate and transparent measurement led organizations Systems Traditional performance measurement and reward that were created decades ago and they reviewed them again Byazmaynd be correct and whether the basis for decision-making have been Atkayy or not? Currently, most measurement techniques that are based on accounting frameworks based on economic theories are built.
But really what companies need a framework to use? When running a new framework this means that companies should ignore the other frameworks?
This article three tracking framework based on activity costs, value added and balanced assessment of the economy that use them widely in the industry is rising to be discussed. Although this article briefly describes these three framework, but further answer the question whether we can handle this within the framework of the simultaneous use of resins or with both?
This article states that this framework and actually supplement Hmdygrnd overwrought when together they can be very effective.
Activity based cost tracking
With a variety of products and customers become an organization, allocation of overhead costs and also something misleading garbler cost products or services are special. As we know, cost tracking system based on activity and cost tracking system in terms of how the traditional allocation of overhead costs differ with each other. This difference is shown in Figure 1. This means that traditional navigation system costs, overhead costs based on only a stimulant that can cost volume production, direct labor hours, machine hours or direct wage rate is multiplexed and can not be the basis for true multiplexing overhead costs created brought, because, for example, a product that it is short cycle manufacturing operations may amount Ghyrmtnasby warehouse costs or take advantage of weekly. Therefore, the traditional form of industrial accounting wrong message to managers. But the navigation system based on activity costs, overhead cost sharing consists of two phases that first major activities are identified and overhead costs in proportion to the resources that are consumed in each activity to activity allocation. Overhead costs allocated to each activity is called the accumulated activity 4. After allocation of overhead construction activities in the first stage, five stimuli appropriate to the cost of each activity are identified. Then in the second stage of the cumulative cost of each activity to stimuli than the amount consumed in the cost of each product lines, these lines are allocated. This navigation system can cost better information for strategic management decisions and to provide added value recognition spending without help. Thus, activity-based cost tracking, cost tracking and production quality improves.
Managers for the company, can improve performance requires understanding how the interaction with other cost measures are functioning. This balanced assessment techniques help to solve.
Balanced Assessment Companies gradually developing property is separated from management and accountability responsibilities discussions occur, which means that managers are accountable against the owners should. With distinction from the owners and managers of the fact that owners have little knowledge of finance and information reported by management to rely on their performance evaluation and management require the use of assessment had to be measured (eg in management literature there is not something that someone can not take much to run it), but if this measure only relies on the figures and financial information may not be the basis for correct judgments and decisions created. One reason is that the managers responsible for the reported figures and financial information and data may be reported to the company is not a reflection of actual performance. Of course, if the managers of financial data and accurate real time reporting just have to rely on this information in evaluating management performance is not enough. Suppose further understand the subject company in two consecutive years with the same interest, but actions in the second year in order to attract more customers to do or to hold training courses to increase skills and expertise of the staff has. Increase customer satisfaction by selling more and sign followed by greater future profits and the other to increase skills and expertise of the staff increase productivity and efficiency will be. But if only the company"s financial performance as we participate in both courses had the same performance but the fact is that in the second year performance is better. Balanced assessment, organizational performance from the perspective of four key measures to:
• Finance
• Customer
• internal company procedures
• training and development.
Each comment will be two to five criteria that these criteria should be set after the implementation strategy.
Therefore, a balanced assessment of performance of the organization after financially and also to measure the Ghyrmaly.
Balanced assessment by Kaplan and Norton (Robert Kaplan & David Norton )
In order to convert prospects and strategy 6 7 8 goals was presented. Strategy, how an organization"s compliance capabilities with market opportunities in order to realize the objectives of the organization to explain. Therefore, the purpose of strategy implementation, achieve the goals set is. Balanced assessment with a focus on measuring performance and compliance with strategy, plays an important role in the development organization offers. This innovation thinking than many managers how to manage change in organizations. Now their strategy more carefully and provide clear and organized as an integrated set of activities appropriate to consider the strategy and performance measurement system associated with the known.
Balanced approach to assessment that measure actual performance (both financial and also after the Ghyrmaly) in comparison with pre-determined objectives to shows us how our chosen strategies toward company goals trend has Moghaddam and priorities and strategies for achieving the goals set us to introduce even a framework for implementation strategies for the organization to the company. In fact, a balanced assessment management tool to achieve Hdfhast. Research has shown that organizations that properly designed systems to measure performance in the field of use can better manage it, so they are more likely to succeed. If properly implemented balanced assessment is accurate management framework offers managers in tracking various factors that affect performance helps. 9th grade leaf collection of raw data 10 in which long-term goals, standards, short-term goals and innovations from the perspective of each insert is to understand the performance manager helps. Managers in building criteria balanced performance to help present and future. Financial measurements are typically retrospective variables that past performance will reflect the manager. On the other hand the cost of training an example of prospective indicators on customer satisfaction and that affects the survival of the company. Therefore, a balanced assessment of performance measurement Ghyrmaly (customers) make changes and improvements in management and a basis for decision-making creates. Balanced assessment of the leading companies in a clear light the same way and with greater profitability previous facilities, but based on activity based cost tracking and cost of providing the correct company.
Owners, managers implement strategies to task managers Sprnd, but their main attention to earning enough from their investments is. Economic value added, as will be discussed in more states that it leaves managers score standards have been properly balance? According to Kaplan to create economic value so successful is the ideal strategy is to try to do.
Economic Value Added Whether a suitable measure of corporate performance assessment, there are investors in identifying investment opportunities and help managers to make decisions Gyryhayy interested for business units to create value?
Economic Value Added is a measure for the overall supervision, to create value in the field, the company is used. Strategy is economic value added, is the way to measure results.
Noting that economic value added measure of economic enterprises the ability to create efficiencies in excess of expected return investors based on certain risk refers to the effectiveness of operations of the business can measure. If the measurement result is positive it can be judged that the management of current operations, and increase corporate value is negative if the performance management reduces the value of business units has been. The criteria with the aim of the organization in increasing shareholder wealth is unity by Stewart (Stern Stewart) provided equal operating profits minus capital costs such that for it has been used as one of the profitability indicators considered be.
EVA = (r - c) × Capital
EVA = (r × Capital) - (c × Capital)
EVA = NOPAT - (c × Capital)
R = rate of return of capital
C = rate of capital costs
Investment Capital =
Net operating profit after tax NOPAT =
EVA = economic value added
Based on economic value to create value in a company depends on two factors:
• Company investments been used to gain efficiency to what?
• For this investment been used to pay what cost?
So what is important in this criterion is that the company could return more than their cost of capital funds earned.
Value-added economic benefit of more precise stock value per share and return 11 to 12 equity brings. Recently, companies step in the way of earnings management have put them into value management leads. Economic value by providing practical models applicable to managers in this process helps.
One of the main benefits of economic value, providing a single language in the entire organization. When the focus of economic value added management process takes organizational performance will be efficient because the economic value added to our responsibility and accountability can only measure of success is that it is abstracted.
Fortune magazine (Fortune) economic value added in October 1996 as the most attractive financial ideas introduced and pointed out that an American Institute of predicted value-added economic profit per share will be replaced. Including Coca-Cola with the use of this criterion would yield about 200 percent of its capital increase during the years 1993-1987. Director of Coca-Cola believes that the economic value forced him to find clever ways to continue to work with less capital; other words, ways to increase performance incentive funds are created and eventually causes the company has superior performance . Stewart recommends that the economic value as the basis for capital allocation, performance evaluation, reward and determination to engage with experts in the capital markets should be used. Thus, effective decision-making is, Communications and the amount of reward increases with the increase in economic value is higher.
Conclusion All three measurement techniques framework with a new starting. High volume of information does not necessarily lead to effective decision does not. In fact, adding a new criteria to existing standards will be more complex issues.
One of the fundamental factors, entitlement is the balance between simplicity and accuracy. May be understood as a complex model is very difficult for managers of a very simple model also can lead to incorrect decisions.
Activity based cost tracking, and balanced assessment of economic value are suitable tools that can participate in achieving success in the business environment, competition and today"s active help. Activity based cost tracking managers can help in understanding the effectiveness of decisions. Balanced assessment of performance in order to view the inclusion of financial indicators and Ghyrmaly is extensive. Value-added economic relationship between the decision shows the performance criteria and reward system is focused to create value. When managers decide frameworks, performance measures and rewards that they have to have equity Brangyzand case, best performance will be. It is important to have good strategy, but managers have the enforcement strategy and its results are equally important.
