Title of the article: Five Modern Management Accounting Myths.
This is an article about 5 myths in management accountings. The author, German Boer has proposed that with the new development and the time changes the way people doing businesses; management accountants have been following the latest fads to study the operations of the company. The myths consist of:.
1. Labor cost used to be too high.
2. True and accurate costs result from better calculations.
3. Product cost determines product price.
4. Modern manufacturing has made conventional costing obsolete .
5. Overhead has increased dramatically in recent years.
Summarize Article.
1. Labor cost used to be too high.
First of all, let us take a look at first myth. According to the author, he has given several examples showing that the labor cost is not a major proportion of manufacturing cost. He believed that modern manufacturing has not made a tremendous decline or increase in labor cost as a percentage. Also, the author mentioned that not to equalize the direct labor and production labor. The percentage of labor cost varies depending on the industry. .
2. True and accurate costs result from better calculations.
The second myth the author proposed is true and accurate costs result from better calculations. He mentioned that true cost is an opportunity cost that manager has to face in order to make a right decision. A complex calculation of true cost does not make a cost true. The more a cost value matches, the more accurate the cost. He suggested that a manager should consider a flexible system that will provide them a different cost analyses on demand. However, no one can prove that a cost is true or accurate.
3. Product cost determines product price.
Another myth that the author has proposed is production cost determines product price. Many managers have mistakenly underpriced or overpriced on certain products. This is because managers do not have the accurate product costs.