The cost of sustainability: the price of social responsibility
Gregory A Totty - ORG530 –Business Ethics and Sustainability
Colorado State University- Global University Dr. Robert Vega
February 24, 2013
The purpose of the following research is to demonstrate the complex dynamics of costing systems as organizations try to predict those unseen costs that factor so heavily in the success and profitability of a business. The various costing systems are defined with a special emphasis on their ability to accurately predict those costs that are not of the normal operation and production of the company. Recent events in ...view middle of the document...
Americans began to view these corporate giants with great disdain; seeing these companies as being socially responsible for our future generations. The great behemoths of corporate American and the rest of the manufacturing n find a now needed a system to predict and assess the cost of this new concept: the idea of maintaining organizational sustainability. Faced with these new challenges, the business accountants look for different monitoring and prediction strategies which will account for the new expenses involved in maintaining global sustainability. The costing systems that traditionally had assigned the cost of production and the other elements of manufacturing can now longer accurately dollar amounts or predict any future costs. Along with these progressive trends in industry, communications now reached unheard of heights and a social revolution powered by the internet, unleased radical criticism in the form of blogs and social media that could instantly change a consumer’s viewpoint of an organization. All of these developments must be considered before any evaluation of a product or service can be accurately measured in terms of cost. Costing Systems Costing systems are accounting systems that help companies determine the cost of a product related to the revenue it generates. Rose Johnson, from Demand Media, describes two common types, traditional and activity-based, both of which have practical applications in business today. Traditional costing, which assigns manufacturing overhead as a function of a cost driver, such as labor; and activity- based costing, which assigns the cost according to the activities needed to produce the item. Traditional costing is mostly outdated now due to the fact that the labor used to calculate cost is now done largely by machines. (2012). Activity-based costing is widely used today as supplement. It features the assignment of costs only to the activities and not a cost driver which leads to greater accuracy. Activity- based costing also is a benefit for management since it assigns the specific cost for each activity; however, this type of accounting is often misunderstood by the management. Activity-based accounting does require substantial resources and therefore is often out of reach for the small business on, (Johnson, 2012). In order to achieve sustainability in the twenty-first century, large organizations have frequently resorted to either life cycle costing or even the complete control of full control accounting. Life cycle costing translates social and environmental performance into revenue as it attempts to account for the entire life of a product’ featuring not only the raw materials and manufacturing, but also the waste products and disposal. When life cycle costing is translated into currency, the Full Control Accounting system works the data into the framework of accounting. The information is thus generated in the life cycle costing system,...