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Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
Edition 8ISBN: 978-0078025747Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
Edition 8ISBN: 978-0078025747 Exercise 2
One Cost System Isn't Enough
Robert S. Kaplan in "One Cost System Isn't Enough" ( Harvard Business Review, January-February 1988, pp. 61-66) states,
No single system can adequately answer the demands made by diverse functions of cost systems. While companies can use one method to capture all their detailed transactions data, the processing of this information for diverse purposes and audiences demands separate, customized development. Companies that try to satisfy all the needs for cost information with a single system have discovered they can't perform important managerial functions adequately. Moreover, systems that work well for one company may fail in a different environment. Each company has to design methods that make sense for its particular products and processes.
Of course, an argument for expanding the number of cost systems conflicts with a strongly ingrained financial culture to have only one measurement system for everyone.
Describe the costs and benefits of having a single measurement system.
Robert S. Kaplan in "One Cost System Isn't Enough" ( Harvard Business Review, January-February 1988, pp. 61-66) states,
No single system can adequately answer the demands made by diverse functions of cost systems. While companies can use one method to capture all their detailed transactions data, the processing of this information for diverse purposes and audiences demands separate, customized development. Companies that try to satisfy all the needs for cost information with a single system have discovered they can't perform important managerial functions adequately. Moreover, systems that work well for one company may fail in a different environment. Each company has to design methods that make sense for its particular products and processes.
Of course, an argument for expanding the number of cost systems conflicts with a strongly ingrained financial culture to have only one measurement system for everyone.
Describe the costs and benefits of having a single measurement system.
Explanation
Verified
Verified
Cost System
A cost system is a mechanism adopted by a company to find the cost of all the resources of the company so that the pricing and the profitability of the company can be determined.
In a competitive environment, it is very necessary to have an efficient cost system otherwise the company may fail in completion or may incur losses. There are several types of cost system based on different concepts.
The given quote tells about the need for different cost system in a single company because of the diverse needs of the company. It highlights that every cost system provides a different output which is beneficial in different ways.
To get the maximum benefit one cost system is not enough because it does not meet the all of the requirements.
The given quote also says that it is not possible for a company to opt for all the cost system because it will leave no time for the managerial work. It would be too complicated to handle all the cost systems.
Moreover, the benefit derived from opting many cost system may not exceed the cost involved in maintaining them.
The given quote does not includes the benefits of using a single cost system as against the use of multiple cost system. Moreover, there is also no mention of the uniform cost system across the whole industry.
No system is perfect in itself and hence they should be opted carefully according to the most significant needs of the enterprise and should be followed accurately.
A cost system is a mechanism adopted by a company to find the cost of all the resources of the company so that the pricing and the profitability of the company can be determined.
In a competitive environment, it is very necessary to have an efficient cost system otherwise the company may fail in completion or may incur losses. There are several types of cost system based on different concepts.
The given quote tells about the need for different cost system in a single company because of the diverse needs of the company. It highlights that every cost system provides a different output which is beneficial in different ways.
To get the maximum benefit one cost system is not enough because it does not meet the all of the requirements.
The given quote also says that it is not possible for a company to opt for all the cost system because it will leave no time for the managerial work. It would be too complicated to handle all the cost systems.
Moreover, the benefit derived from opting many cost system may not exceed the cost involved in maintaining them.
The given quote does not includes the benefits of using a single cost system as against the use of multiple cost system. Moreover, there is also no mention of the uniform cost system across the whole industry.
No system is perfect in itself and hence they should be opted carefully according to the most significant needs of the enterprise and should be followed accurately.
Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
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