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My 2 cents of Costing Analyst

本文发表在 rolia.net 枫下论坛I used to work as Costing Analyst for a small business unit of a large company. It was a manufacturing company and using SAP. Here is my 2 cents of working as a costing analyst.

The costing model we used was quite comprehensive in my view. It was developed by a former manager who is said to be able to work 24 hours non-stop. Please allow me to say something not related to this topic. Through my professional life, I have seen and worked with different very analytical, super smart locals. I mean the “white”. This experience is totally against my impression from school and some on-line reading. I am now much more modest. Another explanation may be that I am well below the average Chinese accountants' IQ. LOL

The model heavily relies on ERP system to feed all the inputs. The calculated results will then be uploaded to SAP to calculate inventory value, COGS. Based on the model and its methodology, we perform two type exercises every year. One is to calculate the “inventory burden” and it is of course done twice, one for the hard close, one for next year’s budget.

Another exercise, a more complete version, is to update an internal template which is used to calculate the pricing for quoting purpose.

Bother exercise involve a large quantity of data, including product information, such as number of components, operation statistics such as cycle time, shop floor square footage, and cost center data. Depending on the purpose, YTD actual or plan data are used. We get most of them from SAP and from numerous calls to other departments. Costs are allocated to product/product line per the cost drivers of its category.

The model and knowledge from the exercise will be used for operation perfomance report, costing exercise for new product and various ad hoc projects.
For example, a spike of volume from so and so. Shall we say “NO” since our Mexico line was already on full capacity? If we do it here in Canada, ----.
This particular European customer is so small and it can not afford the new generation of XXX, though it like our product. What shall we do? Take the risk and make the investment and try to sell this to other customers, which is a different business model from the existing one. What’s the risk?
The list can go on. Working as costing analyst for a small business unit of a large company can be challenging and interesting. The experience is also rewarding. When I read the article about the qualities of good Financial Analyst, I can always link the quality to my costing work.

Again, I have to emphasis that my description of costing analyst is from personal experience. I once saw article asking about the future of cost accountant. The girl who posted question found it quite boring. I then realized that her main job duty was to maintain BOM, bill of material. I did that too but only 5 or 10 minutes per month and this type of work totally disappeared after we moved fully to Mexico.

The depressing part of working as costing analyst can be summarized into the following:
You are involved in many analyses but your impact or contribution is very limited.
Take the inventory burden for example. The Finance manager has only one request, the final results should be comparable to that of last year. No swing of our inventory value. Changing of cost structure? We don’t have time to study that.
The spike? We must say “Yes”. It is so and so, our most important customer. (I agree with this decision. And the costing exercise can also help our next round of price negotiation, so my work was not in totally useless.)
The cost of our model shop is keep growing year after year. So what? They are unionized. To ask them to put one more project code on form is a big task.

On other side, in the manufacturing company, cost analyst truly cannot make any changes. You point out that the R&D amortization is so high. OK, we all know that. It is the engineers who can come up with real cost saving “ideas”. Actually, based on my reading, in Japanese companies, target costing is lead by the engineers not the cost accountant, so is the lean manufacturing. Not sure whether the accountants are involved at all. The story of ABC and other tales on text book are, no doubt, real, but in reality, once you are in the situation, you realize that there isn’t much you can do.

Another hidden drawback is that there is no bright future for costing alone. I mean, look around, the finance manager or directors are all climb from reporting, planning positions. In my own company, it is written in paper that to be considered management positions, reporting experience is a must, plus exposure to one of the “other’, such as fixed asset, auditing, taxation, costing. In conclusion, ambitious young people can begin their career in costing and should move on afterwards. For old fellow like me, I miss the old days working closely with nice PMs, engineers, and BDs. I may choose to come back.

Finally, please add the following to every sentence:
Based on limited personal experience. For fun, not for your information.更多精彩文章及讨论,请光临枫下论坛 rolia.net
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  • My 2 cents of Costing Analyst My 2 cents of Costing Analyst
    本文发表在 rolia.net 枫下论坛I used to work as Costing Analyst for a small business unit of a large company. It was a manufacturing company and using SAP. Here is my 2 cents of working as a costing analyst.

    The costing model we used was quite comprehensive in my view. It was developed by a former manager who is said to be able to work 24 hours non-stop. Please allow me to say something not related to this topic. Through my professional life, I have seen and worked with different very analytical, super smart locals. I mean the “white”. This experience is totally against my impression from school and some on-line reading. I am now much more modest. Another explanation may be that I am well below the average Chinese accountants' IQ. LOL

    The model heavily relies on ERP system to feed all the inputs. The calculated results will then be uploaded to SAP to calculate inventory value, COGS. Based on the model and its methodology, we perform two type exercises every year. One is to calculate the “inventory burden” and it is of course done twice, one for the hard close, one for next year’s budget.

    Another exercise, a more complete version, is to update an internal template which is used to calculate the pricing for quoting purpose.

    Bother exercise involve a large quantity of data, including product information, such as number of components, operation statistics such as cycle time, shop floor square footage, and cost center data. Depending on the purpose, YTD actual or plan data are used. We get most of them from SAP and from numerous calls to other departments. Costs are allocated to product/product line per the cost drivers of its category.

    The model and knowledge from the exercise will be used for operation perfomance report, costing exercise for new product and various ad hoc projects.
    For example, a spike of volume from so and so. Shall we say “NO” since our Mexico line was already on full capacity? If we do it here in Canada, ----.
    This particular European customer is so small and it can not afford the new generation of XXX, though it like our product. What shall we do? Take the risk and make the investment and try to sell this to other customers, which is a different business model from the existing one. What’s the risk?
    The list can go on. Working as costing analyst for a small business unit of a large company can be challenging and interesting. The experience is also rewarding. When I read the article about the qualities of good Financial Analyst, I can always link the quality to my costing work.

    Again, I have to emphasis that my description of costing analyst is from personal experience. I once saw article asking about the future of cost accountant. The girl who posted question found it quite boring. I then realized that her main job duty was to maintain BOM, bill of material. I did that too but only 5 or 10 minutes per month and this type of work totally disappeared after we moved fully to Mexico.

    The depressing part of working as costing analyst can be summarized into the following:
    You are involved in many analyses but your impact or contribution is very limited.
    Take the inventory burden for example. The Finance manager has only one request, the final results should be comparable to that of last year. No swing of our inventory value. Changing of cost structure? We don’t have time to study that.
    The spike? We must say “Yes”. It is so and so, our most important customer. (I agree with this decision. And the costing exercise can also help our next round of price negotiation, so my work was not in totally useless.)
    The cost of our model shop is keep growing year after year. So what? They are unionized. To ask them to put one more project code on form is a big task.

    On other side, in the manufacturing company, cost analyst truly cannot make any changes. You point out that the R&D amortization is so high. OK, we all know that. It is the engineers who can come up with real cost saving “ideas”. Actually, based on my reading, in Japanese companies, target costing is lead by the engineers not the cost accountant, so is the lean manufacturing. Not sure whether the accountants are involved at all. The story of ABC and other tales on text book are, no doubt, real, but in reality, once you are in the situation, you realize that there isn’t much you can do.

    Another hidden drawback is that there is no bright future for costing alone. I mean, look around, the finance manager or directors are all climb from reporting, planning positions. In my own company, it is written in paper that to be considered management positions, reporting experience is a must, plus exposure to one of the “other’, such as fixed asset, auditing, taxation, costing. In conclusion, ambitious young people can begin their career in costing and should move on afterwards. For old fellow like me, I miss the old days working closely with nice PMs, engineers, and BDs. I may choose to come back.

    Finally, please add the following to every sentence:
    Based on limited personal experience. For fun, not for your information.更多精彩文章及讨论,请光临枫下论坛 rolia.net
    • Thanks for sharing. Totally agree with you: "I have seen and worked with different very analytical, super smart locals. I mean the “white”. "
      • 每次给文章加精华,沙发就被你或toysrus抢占,你们这样做~~~~不好!
    • 多谢你!百忙之中写了这篇 Costing Analyst 。 这个月还会有几个朋友谈Costing, 希望大家不论公司大小,行业不同,都来聊聊// Then you have experience with SAP FI/CO?
    • Combined both technical and career development perspectives, nice! Thank you for sharing your thoughts!!
    • Sorry about the endless grammar mistakes. It is a shame. I am in the office now to finish some boring stuff. I post it without reviewing it. My apology.
    • 顶! I like your writing style and thanks for sharing your knowledge and experiences with us。惭愧啊,看来我得好好加强我的English writing skills了。
      • 多谢分享!请教你的inventory exercise的主要过程是不是一个cost breakdown的过程,结果是不是就是rate table=The model and knowledge from the exercise。
        不知道这个inventory exercise是不是加美差异,我从来没听过我公司这么叫。然后用rate table订std cost / quotation,这些用途倒和你说的一致。
    • Standard Cost question Standard Cost question
      公司是wholesale性质,美国的母公司是主要的供货方。出于Transfer Price方面的考虑,尽管加元一直上扬,但供货价没有改变(以加元结算),为了解决gross margin偏低的矛盾,母公司给了credit作为补偿,如何处理credit?
      1.F/X gain?
      2.Re-evaluate inventory, lower standard cost, increase gross margin?
      看似第二种方法更合理,但如何面对Transfer Price的审计呢?
      • 仅供参考,我是制造业的。std cost一般在预算年度初制定且不更改(每个公司应该有自己的更改标准,如差异的%等)。供货方一次给的credit,直接做credit note入var,至于如何入COGS或INV,取决于公司政策和双方协商了。
        • 至于F/X diff,只有在外币标价时才产生。
          • Same here. Same here.
            Standard costs are fixed through the fiscal year. We do have components from the states and we prepare adjustment entries every month based on the currency changes. I think your question is not about standard costs, but transfer pricing. My company doesn’t have this type of issues. Sorry, I don’t have the knowledge to help here. You may post your question as a separate thread. There are experts on this forum that may be able to answer this question and the related taxation consequence or treatment.
            Hi, Jessy, thank you for sharing your experience. I am sorry about my English writing. I said we did two types of “exercises” every year. That’s my expression and is not formal. Internally, we call the first updating “Inventory Rate”. The official name should be something about Standard Cost.
            • 赫赫,我弄成inventory exercises了。。。谢谢解释!
        • 谢谢
          公司老大最后的处理方法的确是将Credit Note放入Variance。
          这几天忙着应付国税局来的GST Auditor,过几天再和大家分享和GST, PSTauditor打交道的经历。
    • Hehe, I had fun reading this post. Thanks for sharing.
    • Thanks for sharing. Thanks for sharing.
      I assume the first exercise is to determine labour and burden(overhead) factor based on the budget numbers. Before "hard close" (update the labour/burden factors and BOM, then implode std cost), it's a normal practice to create a pilot database and test the impacts.
    • thanks. very good writing. it will be wonderful if peope with similar experience can communicate face to face.