Australia Costing Design

[Zirconium]

I've only taken basic accounting subjects so I come from a place of ignorance when it comes to managerial accounting.
I'm working on an accounting system for my business. I'm trying to figure out how to go about attributing design costs to the final price of a product?
It seems that functional based accounting only works with manufacturing costs i.e. direct labour, direct materials and overhead. Design doesn't fall into the category of overhead, so it seems that design will go unaccounted for under this costing scheme. So I guess I have to move on to an activity based costing system? Am I on the right track here?

 

[Werner Reisacher]

You are absolutely on the right track. Management Accounting provides tools to allocate costs and revenues. Only those who understand the "work-flow" of the individual processes in the business cycle are able to allocate costs and revenue in a way that the information provides answers needed to be able influence both, the productivity and the profitability of a company.

 

[Zirconium]

Thank you Werner, I will continue down this rabbit hole .

 

[Zirconium]

I've been doing some more reading and I'm a little confused. If you're doing functional based costing, you still have non manufacturing costs to do something with. How do you deal with them in a functional costing system? Functional based costing apparently is the most widely used system for its simplicity. Yes it's not too much of an issue if your non manufacturing costs are small or you're selling one product. But say those things aren't negligible, what part of managerial/financial accounting steps in and accounts for these costs (without moving onto activity based costing)? You can't simply ignore them. Can you? How do the majority of businesses that use it get around this limitation? It seems like certain costs aren't ever looked at! Also, not everyone is a manufacturer! So if you're not a manufacturer, you simply have no costs?

 

[Werner Reisacher]

i have sent you a private message. Log into the Forum and you will find my message by clicking to envelop on the top right corner between your name and a bell-shaped logo