1 3 Standard Costing, Variable Costing, and Throughput Costing
PowerPoint PresentationMATERIAL COSTS Keep up with fast pace of changing material prices ADAPTING TO...
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Transcript of PowerPoint PresentationMATERIAL COSTS Keep up with fast pace of changing material prices ADAPTING TO...
PRODUCT COSTING TECHNIQUES FOR MODERN FINANCE ORGANIZATIONS
Solution Leader
ADRIAN ROCHOFSKI
OUR COMPANY
We are cost and profitability
thought leaders and the
inventors of ImpactECS
OUR PLATFORM
We provide tools and applications
to connect data, calculate results,
and provide insights.
ABOUT 3C SOFTWARE
OUR BENEFIT
We supplement ERP cost and profitability
capabilities, replicate ERP processes for
scenario analytics, and provide alternate
views and methods for costs and profits.
Manufacturing challenges
What do we mean by “Product Cost”
The three costs: Product, Process, Simulation
The 3 Edicts of Modern Product Costing
Demo examples of Modern Product Costing
Webinar Agenda
POLL: WHAT’S YOUR CURRENT COSTING LEVEL?
1. Beginner – I’ve never heard of a cost sheet
2. Intermediate – I know some costing basics, but there’s still lots to learn
3. Advanced – I’ve spent time building and maintaining cost models
TODAY’S MANUFACTURING ORGANIZATIONS FACE SIGNIFIGANT CHALLENGES
FLUCTUATING RAW
MATERIAL COSTSKeep up with fast pace of changing material prices
ADAPTING TO CHANGES
IN MARKET DEMANDPressure to quickly evaluate and control costs to protect margins
OPERATING GLOBAL
SUPPLY CHAINSComplexities handling local
markets, conditions, and currencies
DEALING WITH
REGULATORY ISSUESDiverse set of laws, tariffs, taxes
and duties across locales
SHIFTING FROM COMMODITY
TO VALUE-ADDED PRODUCTSAdjust business strategies to
remain competitive
MANAGING CONSOLIDATIONS
& ACQUISITIONSChanges across the company -people, systems, and strategies
WHAT DO THESE CHALLENGES HAVE IN COMMON?
EACH CHALLENGE DIRECTLY AFFECTS THE COSTTO MANUFACTURE AND SELL PRODUCTS.
The products you make and how best to make them
PRODUCT COSTS AFFECT FOUR KEY DECISIONS FOR MANUFACTURERS
The prices you charge to grow and protect your margins
The strategies you execute based on expected future performance
The tactics you implement to improve processes, identify root causes and reduce waste
YOU ARE NOT ALONE
Source: "Costing and cost transparency: Helping finance create business value", Deloitte
93%The number of companies who are, or will be, taking action to improve the quality of their cost information.
WHEN WE SAY PRODUCT COSTING, WE MEAN…
Product Profitability
Customer Profitability
Advanced Analytics
End-to-End Profitability
Marketing Costs
Special Handling Costs
Quality Requirements
Cost-to-Serve
Manufacturing Costs
Overhead Costs
BOMs / Routings
Product Cost
Warehouse Storage Costs
Further Packaging
Freight-to-Customer
Post-Production Costs
Supply Chain Costs
Distribution Costs
Total Delivered Costs
…DETERMINING THE DETAILED COSTS TO PRODUCE, PACKAGE AND MOVE PRODUCTS TO CUSTOMERS.
Budgets
Rates & Allocations
Forecasts
Planning
AND WHEN WE SAY PRODUCT COSTING,WE DON’T MEAN “STANDARD PRODUCT COST”.
Standard Costs
Companies need the ability to re-roll
any product, post-production, or total
delivered cost to provide answers based
on current business conditions.
POLL: WHAT ARE THE CHALLENGES YOU’RE FACING WITH YOUR CURRENT PRODUCT COSTING PROCESS
1. Calculating cost answers
2. Trusting the results
3. Identifying trends
4. Simulating changes in market or business conditions
Can you answer YES to each question?
Can your costing methods and process adjust to changing market or business conditions?
Can you maintain and compare costs sets to minimize risk and expose opportunities?
Can you repeatably and reliably connect data between disparate systems (ERP, Shop-Floor/MES, BI, etc.)?
Are you able to quickly and confidently provide relevant cost data to different audiences in your organization?
IS YOUR PRODUCT COST PROCESS IS MODERN?
Do you know the unique cost of each product you manufacture?
MODERN FINANCE TEAMS FOCUS ON CREATING COST TRANSPARENCY IN THREE AREAS
Analyze possible costs
from changing market or
business conditions.
SCENARIO COST
Trace and accumulate
direct costs and allocate
indirect costs of the
manufacturing process.
PROCESS COST
Determine the direct
labor, direct materials,
and manufacturing
overhead consumed.
PRODUCT COST
"
Product Costs
Account for yield loss and scrap credits
Manage detailed BOMs and recipes
Calculate line or route specific costs
Drive volume specific costs
Create meaningful blended costs
Process Costs
Allocate indirect spending with appropriate drivers
Collect direct spending
Calculate cost/work center rates
Assign process rates to products
Simulation Costs
Determine volume and mix specific cost plans
Analyze effects of material and resource cost changes
Calculate costs of new products or customer quotes
POLL: WHAT IS THE PRIMARY ROLE FOR COST INFORMATION IN YOUR ORGANIZATION?
1. Provide visibility for cost management initiatives
2. Drive product/service cost reduction
3. Support pricing and contract negotiations
4. Monitor operational performance
5. Support financial reporting
WHAT IS MODERN PRODUCT COSTING
The ability to quickly and accurately answer the question “what’s the cost of…” to improve your company’s ability to make smarter, informed decisions around
the tactics and strategies relevant to your business.
Rules DataTools
Three Edicts of Modern Product Costing
RULES: MODELS ARE MORE THAN JUST MATH
To deliver value through insights, product cost models should adhere to four fundamental tenants.
Support (your) real world situations
Include measurable and meaningful KPIs
Apply consistent logic and assumptions
Deliver timely results
TOOLS: EXISTING SYSTEM LANDSCAPE HAS ANALYTICS GAP
Sys
tem
Ro
bu
stn
ess
HIGH
Simulation FlexibilityLOW HIGH
Transactional system / System of Record
Rigid or limiting implementations with no inherent simulation capabilities
Integrated Modeling & Analytics Platform
Centralized modeling platform integrated with existing IT architecture
Complete flexibility in designing and managing data and model logic to meet business requirements
Desktop Modeling Tools
Limited controls and auditability assures integrity issues
Unable to scale or handle large data sets, limiting simulation capabilities
Niche Systems
Custom implementations with partial or reduced controls
Simulation capabilities limited to programmed options
ERPModeling & Analytics Platform
User Defined Applications
Spreadsheets
Robustness and flexibility are required to establish and maintain an agile budgeting, planning, and forecasting process.
DATA: CENTRALIZED DATA PROVIDES INSIGHTS
ImpactECS Model ing & Analyt ics P lat form: User -Def ined Models
ETL
Product Costing
New Product & Configurable
Quoting
AllocationsBudgeting & Rate Building
What if Simulations
Variance Analysis
ProfitabilityCost-to-Serve
Customer Master
Activity Master
Order Master
Vendor Master
Sales Master
ERP
General Ledger/Chart of Accounts
Material Master
Routing Master
Product Master
Bill of Materials
Equipment Efficiencies
Equipment Capacities
Set-up / Changeover Times
Lot Sizes
Work / Production Orders
Shop Floor/Process Control
Run Times
Machine Speeds
Labor Times
Material Flows
Forecast Data
What-if? Inputs
Projected Volumes
Best-Likely-Worst Case
Any Input Override
Simulation Results
New Data
Data Warehouse
Warehouse Management
Systems
Payroll & Time Tracking
Ticket Systems
Other Systems
User Defined Apps
Legacy
Lab / Quality
Excel Files
Third Party Payment
Inventory Valuation
Supply Chain Analytics
Combining historical and new data with user-defined rules, assumptions and calculations can power a wide range of analytics activities across the enterprise.
ImpactECS DEMO
THE JOURNEY FROM PRODUCT COST TO COST-TO-SERVE
Product Profitability
Customer Profitability
Advanced Analytics
End-to-End Profitability
Marketing Costs
Special Handling Costs
Quality Requirements
Cost-to-Serve
Manufacturing Costs
Overhead Costs
Routings
Product Cost
Warehouse Storage Costs
Further Packaging
Freight-to-Customer
Post-Production Costs
Supply Chain Costs
Distribution Costs
Total Delivered Costs
Budgets
Rates & Allocations
Forecasts
Planning
Product Costing and End-to-End Cost Analytics with ImpactECS
