Cost Accounting and the Justification of Advanced Manufacturing Technologies

Abstract This article points out that the product of cost accountants, cost accounting numbers, has behavioral implications with regard to the actions taken by engineers. The first point is that the use of only one overhead allocation base to apply overhead will result in a bias against the use of that base within the firm. The second point is that the current form of the income statement has resulted in people within the firm ignoring costs determined by manufacturing when making manufacturing decisions. The third point is that the aggregating of many different costs together within overhead has had the effect of obscuring those costs for decision making purposes. The article also points out that all relevant costs should be identified and used as early as possible in the design phase in order to minimize total product cost.