Cost Systems Design
Also by Pierre Mevellec Les Systèmes de coûts, objectifs, paramètres de conception et analyse comparée, Dunod et l Orde des Experts Comptables, Paris 2005 Le calcul de coût dans les organisations, Repères, La découverte, Paris 1995 Eléments fondamentaux de Comptabilité, co-authored by Guy Rochery, Vuibert Paris 1990 Gestion financière dans les organisations coopératives, co-authored by Michel Belley, Gaëtan Morin éditeur, Chicoutimi, 1985 Introduction au calcul de coûts, E-Thèque, 2002, http://www.numilog.com/ fiche_livre.asp?pid=2661
Cost Systems Design Pierre Mevellec
Pierre Mevellec 2009 Softcover reprint of the hardcover 1st edition 2009 978-0-230-22442-1 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2009 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin's Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-30943-6 ISBN 978-0-230-59522-4 (ebook) DOI 10.1057/9780230595224 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Mevellec, Pierre, 1944 Cost systems design / Pierre Mevellec. p. cm. Includes bibliographical references and index. 1. Cost accounting. 2. Activity-based costing. I. Title. HF5686.C8M434 2009 658.15 52 dc22 2008035150 10 9 8 7 6 5 4 3 2 1 18 17 16 15 14 13 12 11 10 09
Contents List of Figures List of Tables Acknowledgements viii ix x Introduction 1 Part I Theoretical Approach 1 The Rationale behind Costing Systems 5 1.1 Managing resources 5 1.2 Interacting with the environment 7 1.3 Orienting behaviour 8 2 The General Parameters of Modelling 11 2.1 Choice of language 11 2.2 The perimeter 13 2.3 The status 16 2.4 Units of analysis 17 3 The Creation of Architecture 21 3.1 Modalities of the constitution of the unit of analysis 21 3.2 Hierarchization and allocation 30 3.3 Bases for cost allocation 31 4 A Panorama of Existing Systems 33 4.1 Broad categories of systems 33 4.2 Analysis of the two black boxes 37 4.3 Conventional systems 37 4.4 Non-conventional systems 42 5 Analysis of Relevance 46 5.1 Internal relevance 46 5.2 External relevance 54 5.3 Relevance from the viewpoint of behaviour orientation 57 6 From Enterprise Model to Cost Calculation 60 6.1 The tradition of unit costs 60 6.2 Unit cost in non-volumetric context 63 v
vi Contents 6.3 Predominance of a single cost object 64 6.4 Multiplication of cost objects 65 7 Widening of Perimeters in New Models 67 7.1 Total cost over the life cycle 68 7.2 Non-transactional costs 72 7.3 Composite costs 73 8 Articulation with Other Tools of Control and Management 75 8.1 Key indicators as support for cost-value dialogue 75 8.2 Presentation of key indicators 79 8.3 Costing models and quality management 80 8.4 Costing model and stakeholders 81 9 Evolution of Costing Systems 83 9.1 The slowing down of evolution 83 9.2 Promising trends in evolution 84 10 Costs and their Utilization 87 10.1 Price and unit cost 87 10.2 Information concerning costs and cost management 90 Conclusion 93 Appendix 95 A.1 Subsidization 95 A.2 Basic data 96 A.3 Effect of diversified activities in a cost centre 98 A.4 Effect of relative costs of activities 101 A.5 The effect of batch size 102 Part II Presentation of the Cost Systems Families 11 Cost Systems: Synthetic Presentation and Quantified Illustrations 111 11.1 Cost architecture 112 11.2 Common characteristics 112 12 Conventional Systems 121 12.1 Direct value added (DVA) 121 12.2 Theory of Constraints (TOC) 128 12.3 Variable cost 133 12.4 Direct cost 139 12.5 Basic full cost 146
Contents vii 12.6 All direct 152 12.7 Hierarchized responsibility centres 158 12.8 Value added units method (VAU) 166 12.9 Homogeneous cost pools method 179 12.10 Hierarchized homogeneous cost pools method 187 13 Non-conventional Models 195 13.1 ABC Model 000 196 13.2 ABC Model 001 208 13.3 ABC Model 010 functional 221 13.4 ABC Model 011 (hierarchized and value creation oriented) 233 13.5 ABC Model 100 244 13.6 ABC Model 101 254 13.7 ABC Model 110 (functional) 264 13.8 ABC Model 111 276 13.9 MBM (Management by Means) 285 13.10 Tables of synthesis 300 Bibliography 307 Index 309
Figures 1.1 Managing costs 7 2.1 Functioning of organizations without cost systems 12 2.2 Tree diagram of costing systems based on general parameters 19 3.1 Example of transfunctional activities 29 3.2 Macro-activity proposed by Peter Turney, (common cents, 1991) 29 3.3 Transfunctional process (Mevellec, OCE case) 30 4.1 Four categories of systems 34 4.2 Conventional systems 38 4.3 Non-conventional systems 43 5.1 Functioning of a VAU system starting from year 2 50 5.2 Analysis network in a full costs system 51 6.1 Mechanism of unit cost calculation 61 6.2 Autoclosure in the costing systems 63 7.1 Curves of expenses incurred and disbursed over the life cycle of a product 69 7.2 Example of spatial analysis framework in automotive industry 71 8.1 Structure of the Tableau de bord 79 8.2 The balanced scorecard 81 8.3 Example of a process linked to the stakeholder financial market 82 9.1 Evolution cycle of costing systems 86 10.1 Mechanics of selling price fixing 88 11.1 The basic structure 113 11.2 Manufacturing process 113 viii
Tables 3.1 Abstract of 92 tasks at the headquarters of a food industry firm 25 6.1 Generic matrix of unit cost calculation of an object 62 8.1 Deployment of the KPI at the process level 77 8.2 Deployment of the KPI at the activity level 78 11.1 Cost and income statement before inventory 114 11.2 Bill of materials 115 11.3 Bill of operations 115 11.4 Production and sales volume 115 11.5 Materials used 117 11.6 Cost of operations 118 11.7 Products by order 119 11.8 Products by customer 120 11.9 Orders by customer 120 ix
Acknowledgements I am greatly indebted to several people who helped transform my research work, conducted mostly in French into this book in English. I would like, in particular, to thank Pr. Surinder Jathaul from Chandigarh University, Tom Becker from Nantes. I am also indebted to my foreign colleagues who have encouraged this project, especially Pr. John Innes from Dundee, Pr. Dinesh Gupta from Chandigarh, Pr. Matti Sievanen from Tampere. I am also gratefull to my doctoral students and local colleagues Noel Barbu, Thierry Bertrand, Marie Catalo, Jean-Marc Lauzanas, Pascal Perrot, who contributed through their questions and discussions to the development of this work. x