Life cycle costing

• It involves analyzing the organizations

costs and revenues on a product by
product is over several years throughout
the life cycle of the product
 Activity based costing
Traditional accounting-allocation of
overheads doesn't reflect the way they
consume resources.
Gradually overheads become major
expenditure requiring more efficient
allocation
• ABC assumes that costs are generated by
the activities are generated by the
activities performed by the organization is
a process which consumes resources in
order to produce outputs.
• ABC links activities to overhead costs
because activities consume overhead
resources and products
• Activity based management assumes that
business is a set of business activities that
finally add value to the customer
• Activity based costing is a method of
allocating costs to each and every activity
of the organization and of determining the
cost driver for every major activity
• Trying to find value adding and non value
adding activities and target non value
adding activities to reduce costs.
Target costing
• Managing costing during planning and designing stage
of the a product
• It involves four stages;
• Identify the prices that customer s are ready to pay for
the product.
• Deducting the profit margin from the target price to
determine the target cost
• Estimate ing the actual cost of the product
• Determining ways to reduce the actual cost to meet the
target cost to meet if the estimated cost exceeds the
target cost
• It is basically customer focused method.
Quality control tools.

• Business process reengineering

• Fundamental rethinking and radical
redesign of business processes to achieve
dramatic improvements in critical ,
contemporary measures of performance
such as costs , quality ,service and speed
• Kaizen : making improvements in the
processes through small increment s
rather than through large scale
innovations-production process level.
• Shop floor employees are key
• TQM: improving quality in all aspects and
activities of the organization
• Bench marking involves comparing the practices
of the organization with the best management
practices from across the globe.
• Competitive and generic
• Just in time Vs EOQ
• Order cost and holding cost
Lean manufacturing

• Only 5 % of the activities will lead to value

95 % activities waste resources.
• Overproduction ,excess inventory, over
processing, unnecessary motion and
quality problems
• Leadership, vision, planning, execution,
present-day focus and follow up
Six sigma

• DMAIC
• Define: critical to quality issues
• Measure: Metrics and defects in process
• Analyze: Cause of defect
• Improve: Corrective action and preventive
action
• Control: periodic monitoring
Operational Audit

• Purpose definition
• Knowledge gathering
• Preliminary survey
• Development program
• Field work
• Reporting
• follow-up
Operational audit

• Functional
• Organizational audit- departments
• Special audit-quality, service, safety, risk
environmental control etc