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DODD 7000.14-R VOL 4 CHAP 19
MANAGERIAL COST ACCOUNTING
Organization:
DODD - DoD Directives Service
Year: 2010
Abstract: Scope and Purpose
A. The Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standard (SFFAS) No. 4 – Managerial Cost Accounting Concepts and Standards for the Federal Government – (SFFAS 4) provides cost management guidance and direction to all Federal Government organizational entities. SFFAS 4 was released in July 1995 and mandated implementation for all Federal Agencies by 1998. The principles on cost information collection and related performance measurement depicted in this document will be used first, to support management decision-making across the Department of Defense enterprise and second, to provide accurate, timely cost and performance information for external reporting. The principles herein are applicable to Department of Defense (DoD) organizations that support their mission using appropriated funds, stock funds, and /or working capital funds.
B. Chapter 19 summarizes the basis for DoD cost management. It is the first of four chapters describing how cost management will be executed by organizations within the DoD. Chapters 20 and 21 address concepts and standards for cost accounting in an integrated or interfaced financial management system. Chapter 22 addresses manual cost collection.
C. Cost information is an essential component of any well-managed, cost effective organization. Managerial cost accounting can assist both the Military Services and Defense Agencies as they strive to achieve cost effective mission performance. An operational manager's success depends on a thorough understanding of the organization's mission and the steps needed to accomplish it. This includes knowledge of alternate methods of performing the mission and the costs and impact on output associated with those alternatives. Further, cost information is essential to the Department's compliance with the Government Performance and Results Act (GPRA) of 1993 as cost accounting information coupled with performance measures are essential in evaluating and reporting on efficiency and effectiveness of DoD missions and functions.
D. The objective of managerial cost accounting is to accumulate and record all the elements of cost incurred to accomplish a cost object; i.e., to carry out an activity or operation, or to complete a unit of work with a specific output. The cost object, defined in SFFAS 4 as "an activity or item whose cost is to be measured", must be discrete enough and described in writing to such a level of detail to form a basis to establish cost centers and define output quality requirements. Establishing cost objects is a management decision; however, operations, activities and functions significant to enterprise performance should be included to support organization management and reporting. To assure cost information collection efficiency, managers may aggregate multiple similar outputs for which costs are collected. To support internal management, there may be a series of intermediate cost objects which, when combined, equal the final cost object. For example, a final cost object may be the cost to overhaul a piece of military equipment – a tank, aircraft or ship – while an intermediate cost object might be the cost of the engine overhaul, weapons system upgrade, and so forth. Certain costs are assigned as direct costs – costs directly related to accomplishing the cost object - while others are grouped as indirect costs and then allocated to various benefiting cost objects. Cost objects may vary from large programs or activities to smaller specific cost objects, such as work orders, manufactured products, or parts of a construction project. The Standard Financial Information Structure (SFIS) provides examples of cost oriented data elements types for the DoD.
E. Essential to any discussion regarding cost information collection is understanding the difference between budgetary accounting and cost accounting. In any given year, the obligations and outlays incurred may be less than, equal to, or greater than the costs recognized for that period. Costs represent resources used or consumed to accomplish a given cost object. The types of resources consumed may include period outlays for labor and material, while costs may be recognized for the facility at which the work is performed. For example, depreciation costs related to the facility represent a cost to the accounting period and should be allocated to appropriate products/services even though depreciation costs have no impact to the budgetary accounts. Costing is not concerned with the funds used to execute an action, but with the resources (people, supplies, equipment, and so forth) used to complete the action. In budgetary accounting, organizations use allocated funds to acquire inventory and fund employee salaries plus benefits as well as record budgetary obligations to account for the use of the appropriated and allocated funding. In many cases, the unit of issue used for acquiring material is different from the unit of issue for cost consumption. For example, when acquiring inventory, petroleum, oil and lubricants (POL) is purchased by the unit of issue "drum." This budgetary obligation results in an eventual expenditure in the budgetary accounts and an asset in the proprietary accounts. As the POL is consumed, it is issued by the gallon and the corresponding costs are traced to consuming cost objects. The difference in concept lies in the distribution of these different measures (costs and obligations) over a period of time. Table 19-1 uses the purchase of inventory materials as an example to illustrate these timing differences.
F. The cost of a product, service, or other cost object may be recorded either with an integrated or interfaced cost accounting system or with cost finding techniques. Formal cost accounting should be established when management decides that such information must be continuously accumulated, recorded, and controlled. Cost finding techniques should be designed to produce a result that would approximate the result that would have been obtained if a formal cost accounting system was in place. The difference between the two – structured cost accounting and cost finding – provides the capability for organizations to manage the cost of cost information collection.
A. The Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standard (SFFAS) No. 4 – Managerial Cost Accounting Concepts and Standards for the Federal Government – (SFFAS 4) provides cost management guidance and direction to all Federal Government organizational entities. SFFAS 4 was released in July 1995 and mandated implementation for all Federal Agencies by 1998. The principles on cost information collection and related performance measurement depicted in this document will be used first, to support management decision-making across the Department of Defense enterprise and second, to provide accurate, timely cost and performance information for external reporting. The principles herein are applicable to Department of Defense (DoD) organizations that support their mission using appropriated funds, stock funds, and /or working capital funds.
B. Chapter 19 summarizes the basis for DoD cost management. It is the first of four chapters describing how cost management will be executed by organizations within the DoD. Chapters 20 and 21 address concepts and standards for cost accounting in an integrated or interfaced financial management system. Chapter 22 addresses manual cost collection.
C. Cost information is an essential component of any well-managed, cost effective organization. Managerial cost accounting can assist both the Military Services and Defense Agencies as they strive to achieve cost effective mission performance. An operational manager's success depends on a thorough understanding of the organization's mission and the steps needed to accomplish it. This includes knowledge of alternate methods of performing the mission and the costs and impact on output associated with those alternatives. Further, cost information is essential to the Department's compliance with the Government Performance and Results Act (GPRA) of 1993 as cost accounting information coupled with performance measures are essential in evaluating and reporting on efficiency and effectiveness of DoD missions and functions.
D. The objective of managerial cost accounting is to accumulate and record all the elements of cost incurred to accomplish a cost object; i.e., to carry out an activity or operation, or to complete a unit of work with a specific output. The cost object, defined in SFFAS 4 as "an activity or item whose cost is to be measured", must be discrete enough and described in writing to such a level of detail to form a basis to establish cost centers and define output quality requirements. Establishing cost objects is a management decision; however, operations, activities and functions significant to enterprise performance should be included to support organization management and reporting. To assure cost information collection efficiency, managers may aggregate multiple similar outputs for which costs are collected. To support internal management, there may be a series of intermediate cost objects which, when combined, equal the final cost object. For example, a final cost object may be the cost to overhaul a piece of military equipment – a tank, aircraft or ship – while an intermediate cost object might be the cost of the engine overhaul, weapons system upgrade, and so forth. Certain costs are assigned as direct costs – costs directly related to accomplishing the cost object - while others are grouped as indirect costs and then allocated to various benefiting cost objects. Cost objects may vary from large programs or activities to smaller specific cost objects, such as work orders, manufactured products, or parts of a construction project. The Standard Financial Information Structure (SFIS) provides examples of cost oriented data elements types for the DoD.
E. Essential to any discussion regarding cost information collection is understanding the difference between budgetary accounting and cost accounting. In any given year, the obligations and outlays incurred may be less than, equal to, or greater than the costs recognized for that period. Costs represent resources used or consumed to accomplish a given cost object. The types of resources consumed may include period outlays for labor and material, while costs may be recognized for the facility at which the work is performed. For example, depreciation costs related to the facility represent a cost to the accounting period and should be allocated to appropriate products/services even though depreciation costs have no impact to the budgetary accounts. Costing is not concerned with the funds used to execute an action, but with the resources (people, supplies, equipment, and so forth) used to complete the action. In budgetary accounting, organizations use allocated funds to acquire inventory and fund employee salaries plus benefits as well as record budgetary obligations to account for the use of the appropriated and allocated funding. In many cases, the unit of issue used for acquiring material is different from the unit of issue for cost consumption. For example, when acquiring inventory, petroleum, oil and lubricants (POL) is purchased by the unit of issue "drum." This budgetary obligation results in an eventual expenditure in the budgetary accounts and an asset in the proprietary accounts. As the POL is consumed, it is issued by the gallon and the corresponding costs are traced to consuming cost objects. The difference in concept lies in the distribution of these different measures (costs and obligations) over a period of time. Table 19-1 uses the purchase of inventory materials as an example to illustrate these timing differences.
F. The cost of a product, service, or other cost object may be recorded either with an integrated or interfaced cost accounting system or with cost finding techniques. Formal cost accounting should be established when management decides that such information must be continuously accumulated, recorded, and controlled. Cost finding techniques should be designed to produce a result that would approximate the result that would have been obtained if a formal cost accounting system was in place. The difference between the two – structured cost accounting and cost finding – provides the capability for organizations to manage the cost of cost information collection.
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DODD 7000.14-R VOL 4 CHAP 19
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| contributor author | DODD - DoD Directives Service | |
| date accessioned | 2017-09-04T17:57:48Z | |
| date available | 2017-09-04T17:57:48Z | |
| date copyright | 05/01/2010 | |
| date issued | 2010 | |
| identifier other | FPTFCFAAAAAAAAAA.pdf | |
| identifier uri | http://yse.yabesh.ir/std;query=autho470393FD081D20686159DD6EFDEC9FCD/handle/yse/180889 | |
| description abstract | Scope and Purpose A. The Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standard (SFFAS) No. 4 – Managerial Cost Accounting Concepts and Standards for the Federal Government – (SFFAS 4) provides cost management guidance and direction to all Federal Government organizational entities. SFFAS 4 was released in July 1995 and mandated implementation for all Federal Agencies by 1998. The principles on cost information collection and related performance measurement depicted in this document will be used first, to support management decision-making across the Department of Defense enterprise and second, to provide accurate, timely cost and performance information for external reporting. The principles herein are applicable to Department of Defense (DoD) organizations that support their mission using appropriated funds, stock funds, and /or working capital funds. B. Chapter 19 summarizes the basis for DoD cost management. It is the first of four chapters describing how cost management will be executed by organizations within the DoD. Chapters 20 and 21 address concepts and standards for cost accounting in an integrated or interfaced financial management system. Chapter 22 addresses manual cost collection. C. Cost information is an essential component of any well-managed, cost effective organization. Managerial cost accounting can assist both the Military Services and Defense Agencies as they strive to achieve cost effective mission performance. An operational manager's success depends on a thorough understanding of the organization's mission and the steps needed to accomplish it. This includes knowledge of alternate methods of performing the mission and the costs and impact on output associated with those alternatives. Further, cost information is essential to the Department's compliance with the Government Performance and Results Act (GPRA) of 1993 as cost accounting information coupled with performance measures are essential in evaluating and reporting on efficiency and effectiveness of DoD missions and functions. D. The objective of managerial cost accounting is to accumulate and record all the elements of cost incurred to accomplish a cost object; i.e., to carry out an activity or operation, or to complete a unit of work with a specific output. The cost object, defined in SFFAS 4 as "an activity or item whose cost is to be measured", must be discrete enough and described in writing to such a level of detail to form a basis to establish cost centers and define output quality requirements. Establishing cost objects is a management decision; however, operations, activities and functions significant to enterprise performance should be included to support organization management and reporting. To assure cost information collection efficiency, managers may aggregate multiple similar outputs for which costs are collected. To support internal management, there may be a series of intermediate cost objects which, when combined, equal the final cost object. For example, a final cost object may be the cost to overhaul a piece of military equipment – a tank, aircraft or ship – while an intermediate cost object might be the cost of the engine overhaul, weapons system upgrade, and so forth. Certain costs are assigned as direct costs – costs directly related to accomplishing the cost object - while others are grouped as indirect costs and then allocated to various benefiting cost objects. Cost objects may vary from large programs or activities to smaller specific cost objects, such as work orders, manufactured products, or parts of a construction project. The Standard Financial Information Structure (SFIS) provides examples of cost oriented data elements types for the DoD. E. Essential to any discussion regarding cost information collection is understanding the difference between budgetary accounting and cost accounting. In any given year, the obligations and outlays incurred may be less than, equal to, or greater than the costs recognized for that period. Costs represent resources used or consumed to accomplish a given cost object. The types of resources consumed may include period outlays for labor and material, while costs may be recognized for the facility at which the work is performed. For example, depreciation costs related to the facility represent a cost to the accounting period and should be allocated to appropriate products/services even though depreciation costs have no impact to the budgetary accounts. Costing is not concerned with the funds used to execute an action, but with the resources (people, supplies, equipment, and so forth) used to complete the action. In budgetary accounting, organizations use allocated funds to acquire inventory and fund employee salaries plus benefits as well as record budgetary obligations to account for the use of the appropriated and allocated funding. In many cases, the unit of issue used for acquiring material is different from the unit of issue for cost consumption. For example, when acquiring inventory, petroleum, oil and lubricants (POL) is purchased by the unit of issue "drum." This budgetary obligation results in an eventual expenditure in the budgetary accounts and an asset in the proprietary accounts. As the POL is consumed, it is issued by the gallon and the corresponding costs are traced to consuming cost objects. The difference in concept lies in the distribution of these different measures (costs and obligations) over a period of time. Table 19-1 uses the purchase of inventory materials as an example to illustrate these timing differences. F. The cost of a product, service, or other cost object may be recorded either with an integrated or interfaced cost accounting system or with cost finding techniques. Formal cost accounting should be established when management decides that such information must be continuously accumulated, recorded, and controlled. Cost finding techniques should be designed to produce a result that would approximate the result that would have been obtained if a formal cost accounting system was in place. The difference between the two – structured cost accounting and cost finding – provides the capability for organizations to manage the cost of cost information collection. | |
| language | English | |
| title | DODD 7000.14-R VOL 4 CHAP 19 | num |
| title | MANAGERIAL COST ACCOUNTING | en |
| type | standard | |
| page | 13 | |
| status | Active | |
| tree | DODD - DoD Directives Service:;2010 | |
| contenttype | fulltext |