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9. Source Cost Methodology

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  • 1. Análisis de Costos Universidad Cuauhtémoc Campus Aguascalientes Source Cost Methodology Maestría en Administración
  • 2. Contents ACCOUNTING STRUCTURE1 SOURCE COST2 FORECAST REVIEW3 COST CURVE4 Source Cost Methodology2
  • 3. Profit & Cost Centers Structure Source Cost Methodology A well defined Accounting Structure is key to manage the transactions and monitor expenditures efficiently !! 3
  • 4. Account Groups Source Cost Methodology By categorizing the accounts in a Source Cost structure, we can assign ownership and delegate responsibility for each category. This is very useful when reviewing actuals and defining forecast plans. 4
  • 5. Source Cost Ownership Source Cost Methodology Cost Category Owner Direct Material Hugo Pay & Benefits Moni Depreciation Pepe Spares Ivonne Supplies Lety Utilities Armando Freight Abraham Others Rocio Owners are responsible for actuals and forecast figures 5
  • 6. Cost Pareto Circuits 20% Metals 17% Plastics 10% Glue 8% Packing 5% Pay & Benefits 15% Depreciation 7% Spares 6% Supplies 5% Utilities 4% Freight 2% Others 1% Direct Material 60% Labor & Overhead 40% Source Cost Methodology6
  • 7. Source Cost Reporting Source Cost Methodology Actual results can be reviewed periodically and compared against another period of time. The monitoring of expenditures is necessary to aim a proactive decision making. 7
  • 8. QUANTITY (KU) Volume TREND Volume is forecasted based on: • Beginning Inventory • Firm Demand • Estimated Demand • Ending Inventory Source Cost Methodology8
  • 9. Direct Materials UNIDADES 291,080 510,114 749,285 764,503 738,500 26,003 758,687 759,330 767,052 770,019 Act Act Act Act EST AP AP AP AP $ 1Q10 2Q10 3Q10 4Q10 4Q10 DELTA 1Q11 2Q11 3Q11 4Q11 DIRECT MATERIAL COST CIRCUITS 1,680,796 2,532,507 3,705,718 4,268,617 4,120,000 -148,617 4,351,490 4,360,070 4,408,690 4,425,850 METALS 65,583 104,566 146,363 150,141 144,000 -6,141 167,310 167,310 168,740 170,170 PLASTICS 1,747,992 3,341,389 4,688,711 5,115,630 5,120,000 4,370 5,263,198 4,856,740 4,912,406 4,933,796 GLUE 419,226 706,873 1,064,684 1,071,945 1,025,000 -46,945 1,106,820 1,108,250 1,121,120 1,125,410 PACKING 321,870 566,187 811,232 822,087 790,000 -32,087 913,770 915,200 925,210 928,070 GAP TO GOAL 0 0 0 0 0 0 -19,865 -39,730 -59,595 -79,459 TOTAL 4,235,466 7,251,523 10,416,707 11,428,419 11,199,000 -229,419 11,782,723 11,367,841 11,476,571 11,503,836 $/UNIT CIRCUITS 5.77 4.96 4.95 5.58 5.58 -0.1% 5.74 5.74 5.75 5.75 METALS 0.23 0.20 0.20 0.20 0.19 -0.7% 0.22 0.22 0.22 0.22 PLASTICS 6.01 6.55 6.26 6.69 6.93 3.5% 6.94 6.40 6.40 6.41 GLUE 1.44 1.39 1.42 1.40 1.39 -1.0% 1.46 1.46 1.46 1.46 PACKING 1.11 1.11 1.08 1.08 1.07 -0.5% 1.20 1.21 1.21 1.21 GAP TO GOAL 0.00 0.00 0.00 0.00 0.00 -0.03 -0.05 -0.08 -0.10 TOTAL 14.55 14.22 13.90 14.95 15.16 1.4% 15.53 14.97 14.96 14.94 Source Cost Methodology9
  • 10. Direct Materials Cost Reduction Programs • Price Negotiations • Yield & Usage Improvement • Process Improvement • Develop low cost supplier sources • “Think of out of the box to find cost opportunities” Source Cost Methodology10
  • 11. Labor & Overhead Source Cost Methodology UNIDADES 291,080 510,114 749,285 764,503 738,500 26,003 758,687 759,330 767,052 770,019 Act Act Act Act EST AP AP AP AP $ 1Q10 2Q10 3Q10 4Q10 4Q10 DELTA 1Q11 2Q11 3Q11 4Q11 CLAM Cost PAY & BENEFITS 3,066,158 3,934,955 4,756,552 4,793,837 4,790,000 -3,837 4,946,034 5,084,395 4,828,810 4,955,321 DEPRECIATION 1,611,994 1,501,790 1,200,887 932,842 932,800 -42 973,115 982,410 994,565 1,009,580 SPARES 530,614 489,226 1,076,126 839,287 750,000 -89,287 1,038,752 1,033,275 946,088 921,349 SUPPLIES 223,570 665,316 899,360 1,248,005 1,205,000 -43,005 752,426 641,463 646,513 648,921 FREIGHT 6,165 6,288 8,373 11,457 12,000 543 8,580 8,580 8,580 8,580 UTILITIES 443,393 599,210 763,912 819,898 790,000 -29,898 802,326 751,515 796,113 808,473 OUTSIDE SERVICES 450,533 457,503 486,857 483,142 450,000 -33,142 478,270 478,270 478,270 478,270 OTHERS 269,328 437,725 491,444 703,986 710,000 6,014 605,968 605,968 605,968 605,968 GAP TO GOAL 0 0 0 0 0 0 -55,000 -75,000 -100,000 -200,000 Total CLAM: 6,601,755 8,092,014 9,683,511 9,832,454 9,639,800 -192,654 9,550,471 9,510,876 9,204,906 9,236,462 $/UNIT PAY & BENEFITS 10.53 7.71 6.35 6.27 6.49 3.3% 6.52 6.70 6.30 6.44 DEPRECIATION 5.54 2.94 1.60 1.22 1.26 3.4% 1.28 1.29 1.30 1.31 SPARES 1.82 0.96 1.44 1.10 1.02 -8.1% 1.37 1.36 1.23 1.20 SUPPLIES 0.77 1.30 1.20 1.63 1.63 0.0% 0.99 0.84 0.84 0.84 FREIGHT 0.02 0.01 0.01 0.01 0.02 7.8% 0.01 0.01 0.01 0.01 UTILITIES 1.52 1.17 1.02 1.07 1.07 -0.3% 1.06 0.99 1.04 1.05 OUTSIDE SERVICES 1.55 0.90 0.65 0.63 0.61 -3.7% 0.63 0.63 0.62 0.62 OTHERS 0.93 0.86 0.66 0.92 0.96 4.2% 0.80 0.80 0.79 0.79 GAP TO GOAL 0.00 0.00 0.00 0.00 0.00 -0.07 -0.10 -0.13 -0.26 Total CLAM: 22.68 15.86 12.92 12.86 13.05 1.5% 12.59 12.53 12.00 12.00 11
  • 12. Labor & Overhead Cost Reduction Programs • Productivity Improvement • People fficiency • Equipment efficiency • Overtime Control • Tight control on Discretionary Expendings • Be flexible. Adjust resources to demand levels • “Think of out of the box to find cost opportunities” Source Cost Methodology12
  • 13. Act Act Act Act EST AP AP AP AP 1Q10 2Q10 3Q10 4Q10 4Q10 DELTA 1Q11 2Q11 3Q11 4Q11 Loadings: UNITS 291,080 510,114 749,285 764,503 738,500 26,003 758,687 759,330 767,052 770,019 P&L - Internal REVENUE 11,098,700 18,872,550 25,125,271 26,788,700 26,500,000 288,700 27,733,152 27,977,480 27,919,995 29,036,418 DIRECT MATERIAL 4,235,466 7,251,523 10,416,707 11,428,419 11,199,000 -229,419 11,782,723 11,367,841 11,476,571 11,503,836 LABOR & OVERHEAD 6,601,755 8,092,014 9,683,511 9,832,454 9,639,800 -192,654 9,550,471 9,510,876 9,204,906 9,236,462 TOTAL COST 10,837,221 15,343,537 20,100,217 21,260,873 20,838,800 -422,073 21,333,194 20,878,716 20,681,477 20,740,299 Internal PFO 261,479 3,529,013 5,025,054 5,527,827 5,661,200 -133,373 6,399,958 7,098,764 7,238,517 8,296,119 REVENUE / UNIT 38.13 37.00 33.53 35.04 35.88 -2.3% 36.55 36.84 36.40 37.71 DIRECT MTL / UNIT 14.55 14.22 13.90 14.95 15.16 1.4% 15.53 14.97 14.96 14.94 L&O / UNIT 22.68 15.86 12.92 12.86 13.05 1.5% 12.59 12.53 12.00 12.00 TOTAL COST / UNIT 37.23 30.08 26.83 27.81 28.22 1.4% 28.12 27.50 26.96 26.93 HEADCOUNT 2,850 3,160 3,220 3,218 3,220 2 3,225 3,225 3,225 3,225 13 Source Cost Methodology Financial Summary
  • 14. 14 1.400 1.170 0.922 0.868 0.893 0.871 0.911 0.994 0.951 0.988 0.976 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 0 500 1,000 1,500 2,000 2,500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EST 2011 AP PROD A PROD B UNIT COST Cost TREND QUANTITY (KU) COST ($/UNIT) Source Cost Methodology
  • 15. Variable Portion: 52% Cost Curve View Theorethical BEST - MODEL Source Cost Methodology15
  • 16. EXCEL SPREADSHEET Source Cost Methodology Finance Template 16
  • 17. Análisis de Costos Maestría en Administración