Improving costing methods of an SME industrial manufacturing company
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Kustannuslaskennan kehittäminen valmistavassa PK-teollisuusyrityksessä
Knowing the costs in a manufacturing company is essential for profitable business. Accurately identifying costs on product level helps managers to do decisions on product portfolio, and for this case also make decisions on manufacturing location of a specific product. The main research question was to develop a costing system for an SME manufacturing company. This study took a realistic approach, as the goal was actually to implement the costing system. The whole process started with a study of available costing systems. An activity-based standard costing framework was created, which adds variance analysis from standard costing to the best practices of activity-based costing. The intervention part of the study was to implement the costing system in the actual production environment. The study describes in detail the steps of implementing the costing system and especially the practical challenges that are present in real-life companies. As result of the study, the first preliminary product costs were calculated automatically mainly using the information available in the ERP. After analyzing the calculated costs, it was concluded that the first results were not very reliable. The costing system did not reach a maturity level high enough to provide reliable cost information for decision-making. An important question regarding the validity of cost information is that how the information will be utilized. In this case, where one goal is to compare costs between locations i.e. factories, it is also important that costs are calculated with same principles. Thus, the absolute accuracy of information is not the only goal.