JIT: Cost Accounting and Cost Management Issues
JIT: Cost Accounting and Cost Management Issues
Every organization, especially when it is involved in the nature of production, aims to bring the advantage in favor for the company. The idea of making the business engaged in the cost-efficiency and effective adds great value of the competency of the business in the industry. Therefore, organizations should expect certain changes in the areas where the cost is greatly incurred. In this way, the aim to minimize the cost and to have efficiency in work is possible.
The philosophy of JIT or Just-In-Time is already adopted in many countries. It focuses on the undertaking of activities as needed or demanded and driving the four aspects that is more engaged in the cost engagement. First is the elimination of all of the activities that do not add the values in the product or in the service because it focuses more broadly in reduction of the cost. Second is the commitment given to the high level of quality because of the philosophy in doing the work for the first with no time allowed to re-do or to repeat the work. Third is the commitment for the continuous improvement in terms of the efficiency of an activity. The last is giving emphasis on the simplification and increased visibility of the activities that do not add any value in it.
The idea of the cost accounting is evolved in the purposes of product costing and planning control. The cost-benefit or test in designing or changing the management accounting systems can create an advantage for the company they are working for because elaborated and intricate systems is hard to operate and can spend too much money and time. The proposed system for product costing and control is alternately tailored in the accordance of the operations. The available system should also include the product-costing systems such as budgeting or variance analysis. Much more, the management accounting systems as viewed by the executives as the source of the information where they can connect and contribute or use the ideas involved in it.
The JIT focused on how the things get done in managing the work with less cost and therefore, this philosophy affects the many of cost accounting process or procedures in every company. There are advantages and disadvantaged that involved in the application of the JIT. Many criticisms in the business world viewed their ideas as difficult for the accountants. Adopting the philosophical view of the JIT in companies will involve changes in the organization more specifically in the management. The thinking and overall goal are also part of the strategy in which makes it more hard for the leaders in a sudden shift of managing.
Accounting is an essential part of the company because the financial stability is generated from that department. Also, the management must realize that there is cost accounting information needed in the environment or in the process of production. In summary, cost accountants prepare or provide the information with the assurance of its accuracy to the management to help the leaders generate a just, right, and applicable decision.
Cost accounting systems may be affected not only through the purchasing of the needed materials or machineries but also by the increasing traceability of the cost. In the sense of JIT, materials are handled of a single product thus making the facility coast a real direct cost. There is also a change in the cost that has a possibility for accumulation which is contrast in the idea of reduction as part of the JIT philosophy. Changes in the allocation of the indirect costs to production department may give chance for the mistakes and is open to allocate indirect costs. In addition, the reduction on the emphasis of the price variance information is also affected. Price variances are not applicable in the JIT system because it gives importance on the individuality which is again, contrast in the philosophy of the JIT and that is to provide a total costs, and with providing good quality products. In this way, the frequency of the purchase deliveries is reduced and successfully minimizes some extra cost such as the freight expenses.
In using JIT production, the company may increase the traceability of the cost because JIT classified the indirect to become direct. Such example is the maintenance, the indirect laborers are also considered as the production workers or part of the firm. There is also a significant elimination of cost in several activities because JIT eliminates the activities that do not add values. This also decreases the amount of the information in terms of production costs or in labor costs as the system considers the individual as a team.
In the area in which the JIT is concerned with the management, certain activities are involved to the production is about the cost planning, cost reduction, and applying control over the cost. The main reason on this management is to determine the role of the workforce in controlling the activities involved in the production. In part of contributing to the major information given to the management, the cost of reduction targets and measures the work-in process for the finished goods. It is also taken to prove that the actual product costs with target product costs play an important role in organizations that emphasized the cost reduction activities.
The comments to this entry are closed.
Essay Writing Assistance
or fill up this
Read New Posts
I earn $200 a month using Revenue Hits. Try it today.
Click Revenue Hits button below.