International Payment Systems
Brief Introduction about International Payments If you have shopped online on international portals or have received payments from abroad, you would have wondered about how the payments flow across the world and which banks and financial institutions underpin global commerce and trade. Further, if you work in a corporate that has global supply chains with […]
IT-Governance and Why it is Important
Introduction: What is IT governance and why it is important? It is not enough for corporations to have IT systems and expect them to deliver strategic value to them. Instead, there needs to be a mechanism in place to regulate, monitor, and govern the value creation efforts of the IT systems. This governance mechanism of […]
Demand Forecasting – Meaning, Objectives, Classification & Characteristics
Forecasting For an organization to provide customer delight it is important that organization can understand what customer wants and how much does they want. If an organization can gauge future demand that manufacturing plan becomes simpler and cost effective. The process of analyzing and understanding current and past information to understand the future patterns through […]
Wage Increases and Tax Cuts
Recently the Dow Jones index faced a drastic fall. This fall was partly because of the fears of inflation that were sparked by increasing employee wages. This is because employee wages have been stagnant in America for close to a decade now. The drastic short-term rise was attributed by many to be the result of […]
The Economic Implications of Facebook Data Breach
Facebook is one of the most important firms in the American economy. The tech giant is a major employer in the United States. Its actions have a profound economic impact across the globe. This is the reason behind the hefty valuation that Facebook commands. However, this valuation and the entire business model came under siege […]
The costing module is one of the important controlling modules which enables effective internal cost control and accounting. All functionalities regarding cost analysis and cost allocations are provided by this module. The cost accounting module is highly integrated with budget and general ledger modules as well as draws input and provides output to various logistics modules such as sales, procurement, warehousing, shop floor and bill of materials.
Cost Accounting module: Cost accounting module consists of following functionalities:
Overhead Cost controlling: Overhead cost, which is an indirect cost, can not be directly assigned to the products manufactured or services rendered. Sometime, overhead cost is a significant percentage of overall cost. This functionality helps in defining allocation relations in the form of surcharge/rate applicable to various cost centers which in turn is comparable to budgeted surcharge/ rates. The overhead cost control thus helps to monitor and allocate of indirect cost.
Cost price calculation: Under cost price calculation functionality, simulation (such as to make or subcontract), and calculation of price for standard and customized items are performed. This functionality is crucial in determining the lowest price limit for which a product is profitable. The cost price for standard item is calculated based on the following:
For calculation of cost price for customized items, project specific rates and surcharges are applicable. Cost price calculation also forms basis of calculation of valuation price (where a surcharge is added such as warehouse transfer surcharge) which in turn is used for internal financial transactions such as inventory transfer, Work in progress inventory. Sales price or suggested retail price where a sales price surcharge is added to cost price is also derived from this functionality.
A typical flow chart for calculation of cost and sales price is as follows:
Hours Accounting: This functionality is used to account for employees and machine cost and charge these costs to appropriate production orders. Hours spent can either be entered directly or the system can automatically back flush an estimated hour, on completion of an operation. When hours are posted, financial transactions are created in general ledger. Hours accounting is normally done through a working timetable and normal and overtime rates can be defined in the system. It is also possible to enter estimated/budgeted number of working hour for an employee or a work centre for a particular period (such as month/year) and compare the estimated/budgeted hours with actual hours.
Activity based costing: This is an extension of traditional system of distribution of overhead allocation, where only a few allocation bases are used. This functionality helps in controlling cost objects (which may be anything like products, services, projects, distribution channel) with their cost drivers, through a bill of activities and activity results. Thus, this functionality determines the consumption of business process by products, customers and other cost objects based on the cost drivers and helps in monitoring and controlling cross departmental business process.
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Configuration Control and Setting Up of Base in ERP System
February 12, 2025
