As a big multinational company, the Bosch Group owns the diversification throughout various divisions and business units that make the company different in terms of their return on sales and employment of funds. Hence, any analysis of profitability and attractiveness based solely on the return on sales is inadequate. That is the reason the company applies a value-based management concept with OVC (Operating Value Contribution) serving as the key performance indicator. OVC measures whether the company and its divisions/business units earn the cost of the invested capital in addition to other costs. The capital charges are therefore the core element this concept. OVC is calculated as gross margin over the total product costs (PPC total and PPC
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Nowadays, the business factors such as globalization, advances in manufacturing technologies and information system are driving to the need of more detailed, accurate and timely information. Therefore, the role of cost accounting is defined strongly than ever to meet the requirement of the new business environment as well as to support an organization in getting on top of the competition. Periasamy, P. (2010, 298-300) also emphasizes that “cost accounting is one of the important disciplines of accountancy to give proper information required to the management for effectively discharging its functions such as planning, organizing, controlling, directing, co-ordinating and decision making”. He states the important objectives of cost accounting as …show more content…
et al (2009,51-54) has used “Cost behavior” as a term to describe the changes of cost when changing the level of output. There are three types of cost behavior which are fixed costs, variable costs and mixed costs. Fixed costs are costs that are unchanged or in other word, are constant in total within the relevant range of the activity driver. The activity driver can be understand as an output level such as units produced, or associate-related time like working time, productive hours, etc. which is varied and can be measured by quantity or time factors. The figure 6 shown below describes fixed costs behavior. Looking at the graph, fixed costs X is constant within the range from 0 to a and fixed costs Y remains unchanged from a to b units. Therefore, cost is fixed in certain relevant range in which the assumed cost relationship is valid. The term in total emphasizes that total costs are fixed within that range but the unit fixed costs is changeable as the activity driver
Nowadays, the business factors such as globalization, advances in manufacturing technologies and information system are driving to the need of more detailed, accurate and timely information. Therefore, the role of cost accounting is defined strongly than ever to meet the requirement of the new business environment as well as to support an organization in getting on top of the competition. Periasamy, P. (2010, 298-300) also emphasizes that “cost accounting is one of the important disciplines of accountancy to give proper information required to the management for effectively discharging its functions such as planning, organizing, controlling, directing, co-ordinating and decision making”. He states the important objectives of cost accounting as …show more content…
et al (2009,51-54) has used “Cost behavior” as a term to describe the changes of cost when changing the level of output. There are three types of cost behavior which are fixed costs, variable costs and mixed costs. Fixed costs are costs that are unchanged or in other word, are constant in total within the relevant range of the activity driver. The activity driver can be understand as an output level such as units produced, or associate-related time like working time, productive hours, etc. which is varied and can be measured by quantity or time factors. The figure 6 shown below describes fixed costs behavior. Looking at the graph, fixed costs X is constant within the range from 0 to a and fixed costs Y remains unchanged from a to b units. Therefore, cost is fixed in certain relevant range in which the assumed cost relationship is valid. The term in total emphasizes that total costs are fixed within that range but the unit fixed costs is changeable as the activity driver