Manufacturing Cost Case Study

The aim of this paper is to deal with manufacturing cost (which consists of direct material, direct labour and manufacturing overhead that incurred during the production of a product (http://www.accountingtool.com).) prior and after to the 20th century, talk over how manufacturing cost has changed and how the changes impact to management accounting practices in recent years.

According to Dr Veyis Naci Tanis’s paper, he mentioned that for the last 20th century, manufacturing environments have changed a great deal since the Industrial Revaluation. The reasons of the changes are mainly due to advance in information technology, highly competitive environments, and economic recession (Sunarni, 2013). Other researcher has supported these changes

For example, the cost and complication of logistics and shipping have risen rapidly in new enterprises, particularly when those involved in e-commerce. This emphasises the significance of developing cost and performance measures and metric in logistics. Furthermore, inventory management is a major challenge in an interacted economy, wherein firms should match market demand in a current trend. The nature of overhead costs has reformed from mainly labour cost induced by output volume, to a composition determined largely by difficulty and multiplicity of production (Kaplan, 1984). Gradually, overhead costs arise from the quest to utilise economies of scope as well as economies of scale. Experience workers, particularly engineers and software specialists, have changed much of the direct labour force in many plants. In some cases, overhead outside the plant associated with engineering, marketing and distribution has increased to the point where it exceeds direct labour cost (Gunasekaran et al, 2003). This demonstrate that the main cost in manufacturing after 20th century is overhead, which Glad and Becker (1996) has summarise the reasons for the key changes in structure of the manufacturing

These changes may derive by reason of different settings of both economic and cultural environments. Most of the research determined on changes in management accounting practices, primarily in countries such as South Africa and Canada (for example Luther and Longden, 2001). However, Johnson and Kaplan (1987) debated that management accounting has not changed over the past years. However, Libby and Waterhouse (1996) were convinced that there were changes. Furthermore, Ittner and Larcker (2002) also expressed that management accounting practices, which consists of budgeting, performance evaluation and decision-making strategic analyses as a diversity of methods specially considered for manufacturing businesses so as to support the organisation’s infrastructure and management accounting