ACC501 Module 2 - Case

COSTING FOR THE 21ST CENTURY
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(14, September, 2010)
Costing for the 21st Century
The demands in the current global world demands that business management methods be focused on systems which are effective in order to remain relevant in the competitive market. The accounting and costing methods used are therefore required to be effective as they are important in the decision making process. The customer in the 21st century demands to receive goods and services that are customized to his/her own specifications. The customer demands value (Connor, 2010). Since the enterprise is faced with high competition, it is only the enterprise that tries to offer the most-value added service who will survive in the 21st century. The new enterprises will therefore be required to adapt to management and costing methods that are more relevant in the modern world and those that are based on value costing.
In the modern world, and pushed by the need to survive through global competition, it becomes necessary for an organization to offer the individual customer the most valued service and within the shortest possible time before customer decides to move to the competitor. The role of management accounting has had to change in order to meet the requirements of providing timely and relevant information needed for operational controls (Drucker, 1992).
To stay relevant in the modern world, the new enterprise will need to use different management skills than those that were used traditionally (Elliot, 1986). The modern management accounting should be able relevant to assist in the decision making process in the current competitive world (Gupta and Gunasekaran, 2005). Value costing is important in costing the value of a certain product that has undergone various processes, in making decisions and for efficient costing processes (Baggaley, 2003).
The traditional costing method had ignored the value adding aspect on a product or a service as they concentrated on focusing on costs based on financial costs. These traditional methods had ignored the concept of adding and creating value for the shareholders being the reason why organizations are in existence. The effective 21st century enterprise is focused on its own competitive advantage and outsourcing on other resources in order to be more efficient in delivering the best products and services to the customer.
The modern accounting should divert focus from methods that are based only on financial costs alone to methods that focus on the value created by the product. The focus in the 21st century organizations should be on delivering value, which means that focus should be more on the value chain and not establishing the historical cost. The reasons why the 21st enterprise should change its focus are one, the environmental factors surrounding the service and production process. These environmental factors that have contributed to the modern enterpris...