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Two parts to mention here.
1. Management should use a preferred costing method according to the output accuricy and relevance to be helpful for decision making, in many cases it will not be management decision but industry best practice, this will be clear if we compared between process costing and job order costing. While Toyota can work on Job order costing still steel manufacturing company will use process costing. Management still can adopt new costing methodologies like ABC and TOC (if we still categorize these as new)
2. For decision making and pricing management should use variable costing instead of full costing as variable costing will giv more accurate cost than the full one, variable will not include fixed manufaturing overhead as part of unit cost and this will give a clear contribution profit figure.
Hope this helps!
Mohammad
Standard Costing,
Actual Costing and Weighted Average Costing are fully supported as well as Activity Based Costing, Time Driven ABC and Resource Consumption Accounting.
So you can use the method that is right for your business and effectively manage your Product Costs.
long term prefer activity based costing but in short term prefer throughput margin method
End of the day it is controling the cost of manufacturing, so as to reduce the expenditure on the products/materials manufactured.This inturn results in decrease in cost of manufacturing as against the comapny's revenues accrued out of sales. Resulting in rapid increase in profits.
Standard cost while provide a great base to evaluate the activities and enhance performance it is difficult and complicated to maintain while actual costing on the other hand will provide you with the results you can find limited to help you in improvement of processes, ABC has its own problem of being complicated and needs to be kept on a level where efforts must not exceed the benefit
It is related to the type of products. ex. FIFO for food and baverage.
