Question

If you were in charge of a product engineering department in a mid-sized Japanese company producing small motorcycles, what use might you make of cost accounting information for the various motorcycles now in production?

Answer 1

Being the In-charge of a product engineering department in a mid-sized Japanese company producing small motorcycles and having a good knowledge and use of costing accounting factors affecting the products, we can take following steps:

a) Low cost quality material : We can bring up the low cost quality material which could be used in motorcycles manufacturing, thus reducing the product cost.

b) Wastage reduction : Being in the engineering division, we can trace the wastage sources and reasons through applying costing techniques and get the ways to minimize or nil the wastages.

c) Using Activity Based Costing techniques: Through the use of ABC techniques of costing, we can reduce the inventory and its related costs for the company.

d) Analyze the loss making products: The loss making products can be analysed through variable and standard costing techniques, so that if possible the losses could be eliminated and the product would be profitable.

e) Profitable product mix : The costing techniques like standard and variance, can be used to bring up more profitable product mix and use of the limited resources for better economical use.

f) Reduction in fixed costs: The use of multi-purpose machine could be traced out which could reduce the fixed costs, though replacing many individual machines for the production of motorcycles.

g) Learning technique : The learning curve technique of costing can be used to reduce the labor hours and the labor costs which forms a great share in the motorcycle production.

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