Activity-based costing at Cal Electronic Circuits

Article Abstract:

Cal Electronic Circuits, a manufacturer of electronic circuit boards, has achieved successful results implementing an activity-based costing (ABC) system for the cost accounting of its manufacturing processes. The ABC system requires the firm to focus on the true drivers of costs, those activities that are the primary originating factors of cost, in order to accurately ascertain the basis for allocating costs. The accounting staff identified the processes through which products flowed, identified a preliminary list of cost drivers and potential drivers, prepared a spreadsheet that correlated the production process with potential drivers, and assigned weights to the potential cost drivers based on their effect on costs. Cost drivers were selected by scores, and those selected were deemed compatible with operational measures used to monitor and control the production processes. Manufacturing and support processes were then grouped into cost centers for which a cost driver was assigned.

Printed circuit boards, Manufacturing industry, Manufacturing industries, Electronics industry, Managerial accounting, Cal Electronic Circuits

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The anatomy of an effective HMO cost management system

Article Abstract:

The Group Health Cooperative of Puget Sound is a Washington health maintenance organization that improved its obsolete, underperforming cost management system by implementing total quality principles. The early steps taken by the company included defining user requirements, system and report design, and data quality enhancements. Total quality planning ensured that the organization recognized the reliability and accuracy of the information produced by the new system. The total quality planning phase also involved the installation of the system within a preset timeframe. After the implementation, the quality planning phase was replaced by the continuous quality improvement phase. This involved identifying the information required by customers or information users, which served as the basis for the formulation of a strategy for the cost management system.

HEALTH SERVICES, Health Maintenance Organizations, HMO Medical Centers, Group Health Cooperative (Seattle, Washington)

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Developing a pricing system for a small business

Article Abstract:

A pricing system for a small business should be based on the nature of the firm's business, the market conditions within the firm's industry, and the accounting requirements and practices of the firm's management. In the case study presented, Audio-Video World (a small video production company) dropped its market-based pricing system in favor of a cost-plus approach that uses a job order costing process. The pricing process is fully described. This pricing process allowed the company to set a minimum long-term price that can be adjusted for market conditions. Overhead is handled by absorption costing, and special orders are costed on a per-job basis.

Methods, Usage, Small business, Economic policy, Pricing, Unit pricing, Audio-Video World

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