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German Costing Essay

995 words - 4 pages

Volkswagen is an automobile company that uses the German-based costing system. It was founded in 1937 and is the biggest German automaker in the world, as well as the second biggest automaker in the world. The annual financial statements of Volkswagen AG have been prepared in accordance with the provisions of the Handelsgesetzbuch (HGB – German Commercial Code).

The main function of costing systems is help companies determine the cost of a product related to the revenue it generates. Two of the more common costing systems used in business are traditional costing and activity-based costing. Traditional costing assigns manufacturing overhead based on the volume of a cost driver, such as ...view middle of the document...

Perhaps one of the reasons why management accounting is important maybe that the external accounting rules puts the interests of creditors before those interests of shareowners. Hans Georg Plaut, a practitioner, and Wolgang Kilger, a cost accounting researcher, developed GPK in the 1950s and 1960s. Both men were focused on developing cost accounting methods to support decision-making. Similar to direct costing, the most important idea behind GPK is that fixed costs aren’t charged to products. If they were, managers would be induced to make incorrect short-term decisions, such as for pricing and make-or-buy decisions. In practice, however, GPK can be combined with a multilevel allocation of fixed cost-type costs. GPK consists of four important elements: cost-type accounting, cost center accounting, product cost accounting, and contribution margin accounting for profitability analysis. Cost-type accounting separate different costs types such as labor, materials and depreciation. GPK also includes interest as a cost type. Each cost type is decomposed into variable and fixed costs along with the assignment of costs to cost centers.

Below is a table of data from the International Business & Economic Research Journal- March 2010. The first table displays data on Volkswagen, which follows GPK. The second table displays data and ratios from Ford which follows US cost accounting systems.

Year
CGS/Sales
OP/Sales
EPS ($)
T/O
OP/PA
D/E
PA/TA
ROI
2001
0.738
0.057
1.36
1.043
0.187
3.352
0.278
0.059
2002
0.73
0.051
1.42
0.992
0.152
3.421
0.287
0.05
2003
0.751
0.019
0.72
0.907
0.054
3.877
0.275
0.017
2004
0.76
0.026
0.48
0.914
0.076
4.32
0.254
0.025
2005
0.779
0.001
0.81
0.965
0.002
4.639
0.247
0.001
2006
0.785
0.001
2.16
1.089
0.003
4.077
0.208
0.001
Average
0.757
0.026
1.158
0.994
0.079
3.948
...

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