Cost Accounting In Auto Manufacturing Companies In Germany And The United States

Headnote

ABSTRACT

Corporate accountants are mandated to prepare and distribute financial accounting reports for external U.S.ers at end of each accounting period. However, there are no similar statutory requirements for corporate accountants to provide managers of their companies with the management accounting infoimation necessary for decision making in their bU.S.iness operations. Cost accounting is an important integral part of management accounting. Product costing has always been a much debated issue in management accounting. The area that has generated a host of conflicting views is the allocation of overhead costs to products. Traditional absorption costing is claimed to be resulting in an unfair allocation of overhead costs to products. New approaches such as the Activity Based Costing (ABC) did not receive widespread adoption. It is being realized in management accounting field that an emerging costing method known as Resource Consumption Accounting (RCA) is a better method for product costing. It is a method adopted by the German manufacturing companies. This paper describes the German cost accounting method and also compares the German cost accounting with the cost accounting in the United States, specifically in the automobile manufacturing indU.S.try.

Keywords: Cost Accounting in auto manufacturing companies in Germany and The United States, Cost Accounting, Activity-Based Costing, Resource Consumption Costing, Grezplankostenrechnung (GPK)

INTRODUCTION

It is widely realized that there is a frU.S.tration prevailing among senior management in the United States at the inadequacy of cost and resource management skills of managers in their companies. The International Federation of Accountants (IFAc) is advocating for management accounting based on optimal U. S. age of corporate resources (Sharman, 2003). Historically, statutory financial accounting and reporting requirements were emphasized at the expense of variable costing and managerial accounting reports (Bain and Company, 2003). At the end of each quarter, corporate accountants are obligated to prepare and convey financial reports to external U.S.ers. However, there exists no such statutory requirement for corporate accountants to provide the managers with the accounting information necessary for their decision-making needs in the bU.S.iness operations. Furthermore, the oneroU.S. Sarbanes-Oxley Act of 2002 has piled up even more statutory requirements regarding financial reporting and corporate governance, further relegating management accounting into the background.

New approaches to cost accounting, such as the Activity Based Costing (ABC), did not receive...