Page 55 - P1 Integrated Workbook STUDENT 2018

Other elements of cost accounting systems

5.3 Impact on the accounting system

 Simplified inventory records.

 A change in the nature of costs.

 A change in the asset base.

 Absorption and marginal costing will have fewer differences.

 Some disadvantages of absorption costing will disappear.

 New information will have to be gathered.

 Performance will be measured in new ways.

5.4 Benefits and problems

 less cash tied up in inventory  relies on predictable demand,
flexible supplier and a flexible
 less storage space needed workforce

 better quality  there will be initial set-up costs

 more flexible production  for businesses with a wide
geographical spread
 fewer bottlenecks
 there is no fall-back position if
 better coordination disruptions occur in the supply
chain
 more reliable and supportive
suppliers.  it may be harder to switch suppliers.

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