Accounting

Activity-Based Costing is a method that is used to estimate the cost and performance of activities, resources and cost aspects to offer a more precise cost data for making decisions. The method provides bill of processes that defines the cost buildup for goods, services or clients. Through the noting of connections in the resources, processes and cost aspects like goods or clients, ABC makes it possible for one to note inefficient or unintended processes and chances for cost reduction or profit advancement.

This process is composed of two forms of views; there is the cost assignment view and process view. In cost assignment view it allocates costs to the main processes of a company (Moore). Processes are then allocated to a cost object that applies the processes like good or client. The process view offers operational intelligence regarding the procedures of a company. It offers information on cost drivers and performance aspects for every process or a number of activities in a procedure.

Target costing is an instrument and a comprehensive process that greatly elevates a company’s ability to limit costs and elevate the bottom line. It is applied in the implementation of a Lean Enterprise and management of a cost effective organization (Christopher et al). The technique is composed of forms and analysis of processes, control of execution and the control of standard practices which are needed to monitor and control the cost reduction teams.

Target Costing is controlled by the desire to achieve a certain target. It strives to push a company to set up and acquire the cost targets. The setting procedure integrates the company floor with the backing of several departments to make sure that there is a complete comprehension of the market cost for a good. The technique similarly integrates the contemporary management tools like Lean, 6-sigma among others. Moreover, the technique integrates the tools from the silo into the main channel of the needed cost drops.

 

 

 

 

 

 

 

 

 

 

 

References

Christopher S. Chapman, Anthony G. Hopwood, Michael D. Shields. Handbooks of    Management Accounting Research, Volume 2. Amsterdam: Elsevier, 2007. Print.

Moore, K. Using Activity Based Costing to Improve Performance: A case Study Report, 2000.     Retrieved from http://www.dtic.mil