Analysis of Missha`s Cost Management in Practice
¥°. Introduction
All businesses are concerned about cost because one of the fundamental method for increasing profits is to reduce costs. For this reason, managers use cost accounting information to make decisions, including pricing, production planning, budgeting, research, development, and so on which decisions set a goal of reducing costs. From among these, competitive pricing has a same effect like reducing costs because correct pricing avoid a situation that a product consumes a low level of resources but is reported to have a high cost per unit, but it comes from accurate costing system. It is Activity-Based costing system. Activity-based costing system has structuring activity cost pools more finely with cost drivers for each activity cost pool as the cost-allocation base leads to more accurate costing of activities and allocate these costs to products by measuring the cost-allocation bases of different activities¡¦(»ý·«)
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d as those activities essential to remain in business. these activities contribute to customer value, help meet an organization`s needs, and also produce a change of state. Non-value-added activities are all activities other than those necessary to remain in business. Those that do not produce a change in the product`s state and tend to replicate work because it was not done correctly the first time. For instance, scheduling, moving, waiting, inspecting, and storing are non-value-added activities. Management can evaluate whether particular non-value-added activities can be reduced or eliminated by activity analysis.
Today, many companies are using this method that focus on reducing or eliminating non-value-added activities to reduce costs. Dell is famous as a company that use direct selling business strategy. Dell save in distribution costs and in inventory costs by deploying ¡°build to order¡± This case shows us if companies eliminate non-value-added activities, they can reduce costs