The full cost accounting is defined as a system that offsets all costs of the production and utilization of services or products to the cost unit. The full cost accounting is in contrast to the partial cost accounting.
Table of Contents
Definition / explanation
The full cost calculation is divided into three steps:
1. the Cost type accounting (what costs were incurred?) – In der Cost type accounting werden systematisch alle Kosten des Produktionsprozesses erfasst. Diese werden in Einzelkosten und Overhead gegliedert. Die Einzelkosten werden durch die Herstellung des Produkts ausgelöst und sind diesem direkt zugeordnet.
The material costs can be listed here as an example.) Overhead are general and are not directly related to the production of the product. (Overheads include, for example, heating costs or rent.)
2. cost center accounting (where did the costs arise?) - Cost center accounting assigns the overhead costs incurred to the products. This is done according to the principle of averaging. The overhead costs are allocated to the products on a pro rata basis.
The cost center accounting takes place within the framework of the internal cost allocation and is debited in full to the end cost centers. An important instrument for the creation of cost center accounting is the operating accounting sheet (BAB).
3. the Cost unit accounting (for which products and which cost units have the costs been incurred?) - In cost unit accounting, cost type accounting and cost center accounting are combined. This is used to calculate the price of the products and to control profitability.
Concept of full cost accounting
Goals of full cost accounting
The aim of full cost accounting is to distribute all costs that arise in the company to the cost units. It is an instrument for price assessment and price calculation.
The full cost accounting is also the basis of the production program planning, i.e. the definition of the production and sales program. In addition, full cost accounting offers solutions for internal conflicts of interest (for example, the distribution of capacities).
advantages and disadvantages
advantages - Full cost accounting is an easy-to-use business instrument. It forms the decision-making basis for medium and long-term production planning. Without full cost accounting, it is not possible to determine the production costs.
disadvantage - A major disadvantage of full cost accounting is the proportionalization of the fixed costs. This means that costs are assigned to the product that are incurred independently of production. This includes, for example, depreciation costs.
Full cost accounting is not a suitable instrument for making short-term decisions regarding production and pricing. Partial cost accounting offers a better basis for decision-making here.