BusinessAdministration1_08

BusinessAdministration1_08 - Business Administration...

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Lecture No. 8: Cost and Productivity (1) Takahiro Fujimoto Department of Economics, University of Tokyo Business Administration 1. Cost Control 2. Concept of Productivity and Method of Its Modification The figures, photos and moving images with ‡marks attached belong to their copyright holders. Reusing or reproducing them is prohibited unless permission is obtained directly from such copyright holders.
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Main Factors of Product Competitiveness price cost (product cost) administrative expenses operating income labor cost material cost equipment/ tool depreciation product development cost other expenses material productivity material price labor productivity wage, etc. equipment productivity equipment price development productivity delivery / quantity production capacity delivery period/ date quality (total quality) manufacturing quality (conformity quality) design quality flexibility planning/development period production/ procurement time distribution period gross profit
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1. Cost Control Cost Control = activity to control cost of products Cost Accounting provides cost information as premise for the above. Average Cost = “In standard capacity utilization, the Cost that is computed by applying standard efficiency (productivity) and standard cost rate (factor price) against standard work method.” (Namiki, “Basic knowledge on Factory Management”) Concept of average cost was established by Emerson (promoter of scientific control movement)
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(1)Cost Maintenance (Cost Control in narrow sense) = Measure variance between standard cost and actual cost → cause analysis → corrective action By this process, maintain actual cost in vicinity of standard cost. (2)Cost Improvement = Revise target cost per se → efforts on cost reduction (VA = value analysis, etc. (3) Target Costing = Implemented at stages of product planning/development Toyoda Automobile (since 1960s) Target sales price → target costing → allocation of target cost →efforts on achieving target (VE, etc.)
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price—determined by market profit requirement target cost estimate cost VE, etc. standard cost target costing cost maintenance cost improvement Target Costing/Cost Maintenance/Cost Improvement
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History of Cost Accounting (narrow sense) Developed in USA (fiber, railroad). Outline completed in 1920s. Until 1880s: Direct costing (direct cost accounting) = direct expense only Early 20th century (era of scientific control): Full costing (full cost accounting) = allocation of indirect cost to each sector/product
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Cost Control Process by Standard Cost Calculation 1 Standardize cost factors 2 .Set up cost standards (standard cost cards)
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BusinessAdministration1_08 - Business Administration...

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