Traditional cost management systems typically defeat their own purpose by leading corporations to make decisions that ultimately do not optimize performance.
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These systems are the foundation for decisions that are made throughout the corporation. In order for organizations to increase performance beyond current capabilities, a new approach is needed that addresses issues such as understanding the true impact of various actions on the bottom line-and eliminating methods that distort numbers and narrow options. Explicit Cost Dynamics ECD offers such an alternative, and this expertly written, revolutionary book provides an indispensable introduction to the subject. Request permission to reuse content from this site.
An Alternative to Activity-Based Costing. E-Book Information about e-books: E-books have DRM protection on them, which means only the person who purchases and downloads the e-book can access it. E-books are non-returnable and non-refundable. Product not available for purchase. Informative and easy-to-read, Explicit Cost Dynamics: Provides an alternative view and understanding of the impact of costs, actions, and time on the bottom line of a corporation Explains how this new theory can lead to an overall profit maximization Shows that costs can be considered as either a function of activities performed, as a function of resources expended, or of time Shows that the difference between explicit dollars flowing into and out of a company is equal to the rate of change of cash.
He starts out by dissing allocations which scares a lot of us, but it really makes sense to look at manufacturing costs and overhead costs independently. One word of warning, this book is very technical and not for the faint of heart. I have urged him to update it and make it a bit more readable, but if you really want to understand the costs of your business and have some experience, give ECD a try, you'll be glad you did.
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Explicit Cost Dynamics: An Alternative to Activity-Based Costing
Here is a summary that will save you the time and money of buying and reading this book: No matter what model you use to calculate your costs, they will be wrong. While the author's premise is strictly true, it is both simplistic and worthless. There are many things in business and in life that we make estimates and models for. Everyone who deals with costing understands that all costing models have limitations and inherent inaccuracies.
- The Adventures of Liam the Piglet, Book 5.
This is not some singular revelation and it certainly doesn't merit an entire book. In writing this book, my objective was to cut through the fog created by all existing cost accounting approaches to understand just how costs behave and how to influence them. We are told and tend to believe that increasing productivity automatically reduces costs. But if the person still works for you and receives the same salary, their cost is the same no matter how productive they are. This and many other costing concepts are mathematically and logically invalid, so ECD corrects them.
I would recommend the papers as supplements as M Britton mentioned. Explicit Cost Dynamics is a technical foundation upon which lots of concepts are built. Essentials of Capacity Management takes a critical explicit cost dynamics concept, resources, and explains their operational and financial dynamics.
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The papers are based on consulting experiences and challenge existing management thought. How do I create a reliable business case? Does target costing really have an impact on the bottom line as described? What is the true impact of inventory reduction on cash flow. What is the true value proposition for technology implementation? Those who have shared their implementation with me have been extremely pleased with the results. The problem is, no one wants to talk about it because they do not want to give away the secrets to their costing philosophy!
Why tell a competitor that you know something about costing that they don't? Being in the business of consulting companies on performance improvement and cost reduction issues, I was naturally very interested in this book. The concept of focusing on the bottom line and its dynamics rather than on unit costs has its appeal, but aside from using a flashy name for total cost, there is nothing inherently new in the idea.
Further the exposition is repetitive and inconsistent. For example, the author switches on numerous occasions from a unit view to a total cost view to make an argument against unit costing, but resorts to misleading links which would be apparent to anyone with even a superficial grasp of micro-economics. And any author who gives his own book 5 stars and abuses the review system to promote himself and the book does not deserve more than 1 star from me!
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Reading this book created a clear understanding of how costs really work in our company and it helped us get past the age old costing myths that created bad decisions. I went to the authors website and the articles made the concepts that much clearer. Just in the pilots that we have run with ECD we have found that we made a unexpected improvements on our project costing and our product pricing.
More than any other book that I have read lately this book helps us create a substantial competitive advantage in our market.
What Is Explicit Cost Dynamics?
It has become my costing bible. See all 5 reviews. Amazon Giveaway allows you to run promotional giveaways in order to create buzz, reward your audience, and attract new followers and customers. Learn more about Amazon Giveaway. An Alternative to Activity-Based Costing. Set up a giveaway. There's a problem loading this menu right now. Get fast, free shipping with Amazon Prime.
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