2. Agenda
• Trends
• Sample of Manufacturing Statements
• Costing Method
• Productivity
• Key Costs
• CPC/Policies
• Government Policies
• Business Quotes
• Next Steps
3. Disclaimer
• This presentation is on view of trade data for Canada. It is up to
individuals to do their own research as part evaluating government
polices and their impact on the markets.
4. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
9. Costing Method
• Absorption costing
• Absorption costing means that all of the manufacturing costs are absorbed by the units produced.
In other words, the cost of a finished unit in inventory will include direct materials, direct labor,
and both variable and fixed manufacturing overhead. As a result, absorption costing is also
referred to as full costing or the full absorption method.
• Variable Costing
• Under variable or direct costing, the fixed manufacturing overhead costs are not allocated or
assigned to (not absorbed by) the products manufactured. Variable costing is often useful for
management's decision-making. However, absorption costing is required for external financial
reporting and for income tax
• Standard Costing
• Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead
to a product, many manufacturers assign the expected or standard cost. This means that a
manufacturer's inventories and cost of goods sold will begin with amounts reflecting the standard
costs, not the actual costs, of a product. Manufacturers, of course, still have to pay the actual
costs. As a result there are almost always differences between the actual costs and the standard
costs, and those differences are known as variances.
• Activity-based costing
• Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical
manner than the traditional approach of simply allocating costs on the basis of machine hours.
Activity based costing first assigns costs to the activities that are the real cause of the overhead. It
then assigns the cost of those activities only to the products that are actually demanding the
activities.
10. Key Costs for Manufacturing
• Raw Materials (Commodity Prices)
• Labor (Union Contracts or non-union)
• Hydro Rates (Industrial rates)
• Equipment Depreciation (Capital Investment)
• Other Overhead
• Currency Rates (exports)
11. What is Productivity?
• A measure of the efficiency of a person, machine, factory, system,
etc., in converting inputs into useful outputs. Productivity is
computed by dividing average output per period by the total
costs incurred or resources (capital, energy, material, personnel)
consumed in that period. Productivity is a critical determinant of cost
efficiency
15. Conservative Government/Stephen Harper
• Key Quotes from Canadian Manufacturing Association
• Those include removing import tariffs and accelerating tax writeoffs on new
machinery and equipment, cutting the corporate tax rate from 22 per cent to
15 per cent, inking free trade agreements with Europe and others, and
establishing strategic investment funds.
17. Business Key Quotes
• Magna says no new plants for Canada, cites Ontario energy costs (Ontario energy, pension costs a
concern, the company says)
• Chrysler Canada - Windsor officials are echoing the sentiments of Fiat Chrysler Automobiles CEO
Sergio Marchionne, who voiced concerns Friday that the province’s hydro costs, pending pension
plan and a cap-and-trade system are making Ontario too expensive for business.
• The NIER Program assists Northern Ontario’s largest industrial electricity consumers to reduce
energy costs, sustain jobs and maintain global competitiveness. Tembec has participated in the
program since 2010, which has supported more than 1,000 direct jobs across Tembec’s operations
in the communities of Kapuskasing, Cochrane, Hearst and Chapleau. The NIER program provides
relief against fluctuations in the electricity market price, with the requirement to develop and
implement an energy management plan to manage their energy usage and reduce costs.
• Peggy Brekveld, a vice-president at the Ontario Federation of Agriculture (OFA), said farmers have
pitched for a special farming industrial electricity rate in Ontario, but with no luck so far.
Electricity has been one of their largest input costs, leaving them scrambling to compete, she said.
“You want farmers in the province. You want farmers to stay. It’s about food security. It’s about
food being local and close by,” Brekveld said. “But when we have to charge more in order to stay
in business then you’re going to see more exports coming in. And you’re going to get your food
from Mexico.”
18. What’s is required for Canada
• Private sector has to invest in R&D and skills development
• Government
• Cap Hydro Rates
• No new taxation (ORPP/Carbon Tax)
• Key infrastructure investment that support exports
• Targeting skills and training funds to support advance manufacturing
• Expand Trade and Investment Deals
• Reduce the time required for environmental assessments