In an effort to adopt new methods of automation, most manufacturers have embraced robotics as a more cost-effective and efficient solution, and the results have been great. But just as it takes some time to get used to the new technology on the line or in your warehouses, it’s going to take some time to make the necessary adjustments in your accounting department as well.
Tom Scharf, a principal in Rea’s Cleveland office, has worked with a lot of manufacturing companies over the years and, in this episode of unsuitable on Rea Radio, he’s going to talk about the impact these technological advancements have made, or rather should make, to your method of cost accounting.
Even if your business has made the same product for the past 50 years, the way you make your product has almost certainly changed. New technologies and methodologies have reduced the number of direct labor hours that go into producing just about anything. So if your accounting practices haven’t changed just as much as your manufacturing process, you’re probably not accurately calculating the cost of a given product.
And the impacts of this go much farther than a spreadsheet – when you calculate cost incorrectly, you will just end up giving the decision-makers in your business bad data, likely resulting in bad decision making.
If you are a business owner who creates any kind of product, you will be interested in these other topics discussed in this episode:
- How new tax laws and regulations will affect manufacturing businesses over the next few years.
- What’s right for your business: standard job costing or specific job costing?
- The difference between fixed and variable overhead and how it’s allocated.
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Click here to read the official transcript for episode 150, “cost accounting: how much does that really cost to make?”