Cost Pools and Cost Objects

Topic 6 Management Accounting and Cost discipline Shelter Partnership a. My main learning outcomes from Topic 6 and the movement Study 1)Firstly, I realize management narrationing has much to offer. somehow I posterior handle physics but not accounting. straightway thanks to this course I can appreciate and make smell of it. The bit that really caught my attention was seeing how management accounting can be really useful for business planning, equal management, bud shooting and performance measurement. It offers comminuted and more objective inputs for decision making.On my part, I would say this is one(a) of my most important learning outcomes as it changed my personal grab and picket of accounting. 2)I arrive learnt that a good saluteing strategy is needed to get a better grip on the actual speak to of my products and function. Gaining a better understanding of the Cost Pools (and the types of cost) and how these costs be assignd to the Cost Objects is a good st arting point. 3)I realize that it is very important to identify and pin down the Cost Objects properly from the start. While I may like to define the Cost Objects narrowly, it should totally be done to the extent it is economically viable. )I get along that there are a number of ways to allocate indirect costs (from the Cost Pools) to the Cost Objects and these can cause distortion. It is therefore imperative to establish a meaningful and acceptable way of allocating such cost to better reflect the true cost. This leads to my next learning outcome. 5)Stephen Coveys begin with the end in mind rings true here. If I had wanted to measure and analyze the Cost Objects by products, services and countries(Multinational Company), both the Cost Objects and the way cost is allocated needs to be defined early.In this case, a deeper engagement between my Marketing department and the Finance Department is necessary to fine tune the costing system. 6)When looking at the cost numbers, it is imperative for me to consider and discern the context and assumptions used in arriving at the numbers since these are not standardized. b. Applying the learning outcomes to my own organization. 1)I subject in a large IT company and my portfolio includes Marketing, Consulting and Strategic Account (Client) Management.In the area of Account Management, the company had recently implemented a system to track the profitability of each(prenominal) Client. In the case of revenues, it is a comparatively simple process. However, getting a truer picture of the cost of providing passkey services to each of our thickenings is a major challenge. In a sense, our client account is a Cost Object. 2)In a typical project undertaken for our client, professional services are provided by dynamically formed teams made up of Project Managers, Business Consultants, Senior Project Leads, Business Analysts, Programmers and Testers.Presently we are allocating cost to each of our clients according to the numbers of professional man-days consumed by the clients base on a blended man-day rate. The following is a simplified congressman of how cost is allocated. 3)We have room for significant improvements in the way we allocate cost. a. Labor cost which is a direct cost becomes a pocket-size complicated due to the project nature of the service. But since our systems captures the actual clock time-sheet for each employee according to projects, we should be able to eventually allocate labor cost directly to the Client, Cost Objects and give a truer reflection of cost. . Secondly, we should explore for more appropriate ways for allocating indirect cost such as set off & ticketing administrations and office space which is presently added into the blended rate. Since administration for travel and ticketing altogether applies to overseas projects, In-Country projects should not be burdened with these costs. Similarly, office space is only applicable for projects running out of our own p remises and should not be loaded to projects undertaken at specific clients premises. At any one time around 50% of our staff is based outside of our office. )We found the shortcomings in cost allocation affects our decisions on pricing, discounts, expense provision, use of resources (especially when contending for resources), budgeting and business planning. 5)We have some multi-nationals clients, and I am curious about the effect of establishing lapping Cost Objects to present a group/enterprise level view in addition to the present individual client level view. In our case, we have local offices in a number of countries and resource sacramental manduction is quite extensive, however no cost transfer has been allocated to the individual client account.