NEW MANUFACTURING ENVIRONMENT

New Manufacturing Environment

New Manufacturing Environment

Traditional Management Accounting

The traditional management accounting performance measures are most beneficial fitted to a secure situation, which is programmable. These assesses include control of budget and standard costing which depends on the ability to be talented to forecast the future with several accurateness (Mowen, 2000, 476 -531). Standards usually set based upon past performance, the assumption being that the past is a good predictor of the future. With the increase in competition in world markets, and the ever-increasing rate of change of technology, the manufacturing environment has had to become more flexible in order to meet customer needs. The long batch runs of the same product the emphasis is on small batches and constant product innovation and a requirement to improve and monitor quality (Colin, 2007, 56-61).

However, as compared to traditional costing systems, ABC system offers better and different allocation bases. The rates of overhead based on the level of activity at capacity. This is also a contrary application to other methods since the other methods use budgeted level of activity. The most successful distributors of electrical firm handle on the sources of revenues and direct costs, but many do not have a good grip on how the products we distribute and consume, they serve customers and support services that will help other indirect costs. An Optimization of profitability is necessary for the top-of-mind issue for many industry leaders. To effectively manage profitability, retailers must use the suitable process of cost and having the correct in sequence and analytic tools. Several allocators use any method acting of allocation of cost that deficiencies obstinacy and keeps them from sympathetic the real success of clients and products. Unluckily, when they seek to optimize their profitableness, many allocators use an array of background spreadsheets rather than a committed request as a process of capturing prices (Clancy, 1987, 44-49).

An improve understanding of the procedures used to identify the intensities and flaws of an organisation in the execution of this process. By employing this method becomes more relevant when the making procedure are "in line" with a skilled and versatile, the processes are flexible, and that the technique used is mass constructions of dissimilar size with the function of the process of Just-in-time (Baker, 1998, 23-29).

Traditional cost system depends largely on volume variance. Volume variance measured as cost of labour and machines used for manufacturing number of items. If the number of item produced is less than expected, then actual cost is likely to increase. This means labour and overheads used in manufacturing of products not planned in a proper manner. On contrary, activity, based costing system provides impeccable focus on manufacturing of product. According to Granof (2000) many companies in US and UK and China have adopted activity based costing system, with the help of these system managers of account and other department should keep separate tracks of costs differently. This is required to manufacture individual units in such manner that product design manufactured in batches and manufacturing facility ...