1. Activity Costing Accurate product costs are best achieved when support activities can be directly applied, which is illustrated by cases. Simplification of data collection by using process standards instead of operations standards is explained and compared with Activity Based Costing (ABC) methods. Further reduction of manufacturing overhead pools by direct costing negotiated value added services are addressed. The significantly smaller, remaining overhead budget, called “super burden” is described.
2. Velocity Costing The inherent inaccuracies of traditional overhead distribution are outlined and time is presented as the new basis. Methods are introduced to create lead-time day “standards”, using the MRP system. A numerical example is used to show how an overhead budget would be developed and distributed, how variances would be handled, and how one company did it.