A1-costing concepts Flashcards
- six areas of the CGMA cost transformation model and how these apply to our business(1)
- engendering a cost- conscious culture: this part of the model suggests that everyone in our business from the directors to the employees should be aware and conscious of the costs being generated and be motivated to reduce cost as far as possible. it is not just top-level managers that should be concerned about cost, there should be a culture where everybody within the business has a part to play.
- six areas of the CGMA cost transformation model and how these apply to our business(2)
managing the risk inherent in driving cost-competitiveness:for this part of the model we need to consider and then manage any risks associated with cost reduction. for example, we could reduce costs by only using the cheapest supplier. however, this could potentially lead to quality issues and customers choosing our competitors` products rather than ours. ultimately, we need to balance cost reductions with quality and our customers still wanting to buy our products.
- six areas of the CGMA cost transformation model and how these apply to our business(3)
understanding cost drivers and cost accounting systems and processes.this part of the model suggests that we need to fully understand why the costs that we incur arise and how different variable affect those costs. we need to be aware of the drivers of cost as this will enable us to manage those drivers with the aim to reduce cost. in order to achieve this understanding, we could implement activity-based costing rather than our current absorption costing system. this would involve identifying individual activities within the business and the associated driver of the cost associated with that activity.
4.six areas of the CGMA cost transformation model and how these apply to our business(4)
connecting products with profitability: this part of the model is abouy ensuring that all of our product make a positive contribution towards profit. this means that each product should be costed as accurately as possible to identify any products which are not achieving this, with a view that such products are withdrawn. to achieve an accurate cost is relatively straightforward for inputs such as raw material, bought-in components and direct labour but is less straightforward for overheads. this is where understanding cost drivers is important.
5.six areas of the CGMA cost transformation model and how these apply to our business(5)
generating maximum value through new products:developing new innovative products is a strength of ours and this part of the model suggests that we should make most of all the new products that we develop. as well as making sure that all new products are going to be profitable, we should make our new products as appealing to as broad a range of customers as possible. for example, we could consider making our products in different ways…
- six areas of the CGMA cost transformation model and how these apply to our business(6)
incorporating sustainability to optimise profits:this part of the model is about embracing envirionmental concerns to ensure that we operate in a sustainable way beacuse this helps to reduce cost(in term of waste)and also potentially gives a competitive advantage. we can embrace this by ensuring that we keep at the forefront of … technology.
- digital product
a digital product typically refers to a product that is stored, delivered and consumede in an electronic format.
- features of digital product
- variable cost is negligible when being replicated
- no inventory of the product-avoids the need for inventory valuation by the accounting function.
- the lifespan of digital products can vary greatly. determining the lifetime can be very difficult particularly when there are rapid changes in technology as there are at the present time.
- the development costs will iniatially be capitalised and then amortised over the life
- similarly, determining sales volumes over the lifetime will also be difficult. - determining the drivers associated with these costs may be difficult, many product features or functions might also be shares amongst a number of products. we need to determine how to absorb these costs into each individual product
- features of digital costing system
- dynamic
- linking internal digital systems (for example, our digital production, purchasing and sales systems) with those of our suppliers, customers and the market
- data is gathered
- from all of thses sources and from the internet
- give up-to-date costing information
- reflects current information
- benefits of digital costing system-1
- information can be regularly updated
- information used to set standards are always appropriate for the time(that is , reflect ruling market prices and current operating conditions)
- be aware of the current environment and should act accordingly in terms of purchasing and operating decisions.
- allow us to use dynamic pricing of our products so that we can change prices as soon as costing change or the market changes
- benefits of digital costing system-1
- information can be regularly updated
- information used to set standards are always appropriate for the time(that is , reflect ruling market prices and current operating conditions)
- be aware of the current environment and should act accordingly in terms of purchasing and operating decisions.
- allow us to use dynamic pricing of our products so that we can change prices as soon as costing change or the market changes
- benefits of digital costing system-2&3
- sourcing supplies and suppliers
- identify the best price or the best lead times
- make intelligent suggestions for supply options through the use of artificial intelligence - allow us to better understand the factors or activities that are dirving cost. this is particularly important for overhead costs(which for us is a significant proportion of total production cost)
- see where cost is being incurred
- focus where should be directed in managing cost
- types of cost of apps to be incurred-1
- cost of developing the apps(pre-launch)
-design and development of the app - costs associated with maintaining and operating apps post-development (ongoing costs)
-functional services
administrative services
-infrastructure services
-IT support services
- types of cost of apps to be incurred-2
- fuctional services
- execute the fuctionalities and features of the apps, such as push notifications ,social media and chat,,SMS and email messages
- royalty fee which as noted above will be a direct cost - administrative service
- an intuitive, powerful, accessible and user-friendly administration dashboard
- namage the content of the apps
- manage the fuctional services detailed above
- update the apps
- manage the apps
- collect and analyse user behaviour
- control access by user s and enable data or user segmentation
- the most difficult to anticipate as they will largely depend and differ based on each individual app
- types of cost of apps to be incurred-3
- infrastructure services:
- platform and servers which support the hosting of the app, data storage and data delivery
- facility to make payments for additional content - IT support services
- in the form of testing the app and dealing with any bugs that are present
- after launch, there will be on-going IT support required
- -the maintenance and monitoring of servers
- -data storage and image data
- -deal with IOS and Android updates
- -updates to application programming interfaces(APIs) and bug fixing
