Collection of data and calculations
All these factors that influence the conception of costs also imply that data collection is not limited to measurement and registration of the firm's own production. It is necessary to access a large number of information bases for the different calculations, some of which are listed below:
Historic, internal data:
o All accounting data in the financial transaction system
o The contributing margin from a number of relevant divisions within the company, its customers, products, etc.
o Prices, price developments, key figure indexes, the "Dupont key-figure pyramid" development, etc.
o Technical data such as material consumption, time consumption, waste, degree of exploitation, etc.
Historic, external data:
o Price indexes, wage indexes, rates of exchange, interest rates, etc.
o Technical achievements, norm data, etc. for production, machinery, employees, etc.
o Industry data, macro economic data, statistical data, etc.
o Competitive data, more or less exposed.
Non-financial data, both internal and external:
o Consumer satisfaction polls, consumer attitudes
o Quality measurements, societal optimism/pessimism, expectations for business cycles/market conditions. This data is often applied when doing different kinds of bench-marking, balanced scorecards, etc.
Typical cost divisions
In a calculation task a number of the earlier mentioned cost divisions are normally applied. The most important are:
o Fixed and variable costs. A number of factors are crucial when costs are arranged in fixed and variable costs.
o Direct and indirect costs. Direct costs can be attributed to an action, a production, product line, a production facility, or a cost bearer. Furthermore, these factors are applicable on different levels, such as unit, product line, or section.
It may be necessary to categorize costs in different forms depending on the decision that is to be made. This categorization process can go a bit against the grain of the registration assignment.
Indirect costs then, are the costs that are not direct.
In some cost model plans of distribution, the purpose is to divide the different indirect costs into various cost bearers/products (e.g. see the full cost model at the end of this chapter).
In other models, such a distinction is not made (e.g. the contribution margin model).
o Sales and administrative costs are a special kind of costs. They are not directly variable with regards to production, but are indispensable in both the short-term and in the long-term. On the other hand, these costs are often adjusted for activity level as well as sales effort aspirations, service level, control level, etc. But these costs are dependent on the specific business, its strategy, and management. Understanding the relevant time horizon is crucial here. For instance, the size of the sales force in the perfume department of Magasin is determined according to the expected sales, but on a rainy morning there could be over capacity because the sales force in the very short term is a fixed cost, due to scheduling.
Remark: the categorization of a cost as direct or indirect depends on which cost bearer is defined, i.e. the purpose of the calculation (e.g. the production price of one working hour for an accountant, or 1 liter of milk, or a Sony CD-player). In the same way, the division into variable and fixed costs is dependent on the chosen time horizon. For instance, if a single product units is chosen as a cost bearer (e.g. a liter of milk), many costs become indirect. On the other hand, if product lines are focus units, (e.g. the milk packing line) then more costs are direct.
