Process of cost and performance accounting
For the optimal implementation of cost and performance accounting, the process must be understood.
Cost type accounting
According to polyhobbies.com, the cost type accounting deals with the question of which costs were incurred. In a company costs can arise in different categories, so that it can be defined in which areas of the company the costs or possibly excessive costs can arise.
The special feature of cost type accounting is that it forms the basis or the basis for cost center accounting and cost unit accounting. Accordingly, the question “What costs were incurred?” Must be answered first.
Primary costs & secondary costs
When calculating cost types, we distinguish between two different cost items. On the one hand, these are the primary costs and, on the other hand, the secondary costs. In order to understand the difference in a simplified way, the examples are useful.
Primary costs
One often speaks of primary costs in the case of classic acquisitions for the company, for example office supplies or furnishings for the office. In the case of larger purchases, such as machines that are required for production, one also speaks of primary costs .
Secondary
costs In the case of secondary costs, we are talking about costs that are caused by another party, for example. Let’s say we have a machine that is no longer working properly and needs a technician. The costs incurred for this technician are called secondary costs . This technician is often not only responsible for one machine, but is paid by the hour and ensures that all machines function optimally. Therefore, the operating accounting sheet is used, which ultimately falls under the heading of secondary costs.
Overheads and direct costs
A distinction is not only made between primary and secondary costs , but also overheads and direct costs .
Overhead
The overhead is not a direct cost that can be attributed to the product or service. Rather, they are general costs that are not specifically related to the product, but to the operation or company. This could be employee wages , for example .
Direct costs
In the case of individual costs , we speak of costs that have arisen from the product or service and can be directly allocated to it.
Fixed costs and variable costs
There are different types of costs that can arise, including fixed costs and variable costs.
Fixed costs
Fixed costs are costs that always remain the same, such as salaries or rents . These costs are always also overheads .
Variable costs
When we talk about variable costs , these are not fixed costs , but, in contrast to fixed costs, costs that can change . These costs can vary, for example, if the production volume higher will.
Cost center accounting
After cost type accounting, the second step in cost and performance accounting is cost center accounting. Here, the question “Where did the costs arise?” Is attempted to answer. Although we talked about categories in the first invoice, the difference is that in cost type accounting the costs are divided into different categories and in cost center accounting it is defined where these costs arise.
Main cost centers
There are various places in a company where costs are incurred. A distinction is made between two cost centers. The main cost centers and the ancillary cost centers .
By the main cost centers we mean positions that have something to do with the sale and manufacture of products or services . These costs are decisive for the implementation within the company. This could be material costs or packaging costs , for example .
Ancillary cost centers
Under Besides cost centers we understand costs arising arise side activities can. Often these ancillary costs are also internal services and therefore have no specific connection to the final product or service.
Cost unit accounting
The last point in cost and performance accounting is cost unit accounting. The question “What are these costs for?” Is answered here. This is used to evaluate what the level of costs and the cost structure in the company look like . This also helps to define what the pricing policy and ultimately the planning calculation looks like with regard to a long-term work-up.
Cost unit accounting
In cost unit accounting, the exact value is determined with the help of an exact calculation of the manufacturing and cost of the product. This can be used to determine whether the current unit price on the market is economically viable in the long term . In addition, this calculation has the advantage that for certain offers and discount campaigns it can be shown up to which goods price a profit can still be booked.
Cost unit time accounting
In contrast to cost unit accounting, with cost unit time accounting a certain period is taken and the services and expenses are compared. In this way, the exact costs of this period can be determined. In this way, it can be shown whether an operational success has been achieved in this period of time – both in relation to the individual product and to the entire company.
Sample calculation
A wide range of information and analyzes can be carried out with cost and performance accounting. In this example we want to calculate the current productivity in the company.
We have this information:
Calculation example
The company has 67 employees, sales of around 928,400 euros and a reduction in inventory of around 2,000 euros.
Here, the sales revenue is divided by the employees, so that we come to a productivity per employee of 14,662.69 euros.
This information can now be used to define, for example, whether productivity has
improved or worsened over the years or months (depending on which period is in question) .
Conclusion
The topic of cost and performance accounting is a broad field that offers many possibilities and opportunities for optimizing your own company . With the cost and performance accounting, a lot of important information about the company and its profitability can be determined.
The cost-performance calculation can show which price for the product or service is profitable in terms of the associated expenses and is therefore sustainable in the long term . At the same time, it reveals which costs arise, which types of costs are involved and in which areas they arise.
This information can be used to save costs in certain areas in the future or to invest more capital .
