Proposal for a New Cost Centre Division Model and Information System Upgrade

In the diploma thesis, I address the formation of cost centres, about which data was obtained in the company where she is employed. The diploma thesis consists of a theoretical and a practical part. In every business system, accounting is a service activity that is required to help those who strive for the company's success on the one hand to make business decisions and on the other hand to determine what the financial situation is within the business system itself. Thus, we can say that accounting is the language through which economic information is conveyed to those who are interested in it.

Problem

In the diploma thesis, I address the formation of cost centres, about which data was obtained in the company where she is employed.

Solution and Method

The diploma thesis consists of a theoretical and a practical part. In the theoretical part, descriptions of individual accounting elements are summarised from professional literature, whilst in the practical part, based on new knowledge and practical experience in accounting, an attempt was made to demonstrate cost monitoring and company operations through the example of a proposal for a new cost centre division model, which would represent an upgrade of the information system and contribute to simplifying data capture for routine reports that serve internal as well as certain external users.

All value data are taken from the company's annual report and from the gross balance sheet for the year 2007. As the fundamental guideline of the diploma thesis, I emphasise the fact that cost control is one of the key elements for successful management of every business system. It must be based on systematic cost analysis, which enables a comprehensive overview of the causes or bearers of costs in business processes.

This raises the question or challenge of how to monitor and analyse costs and seek solutions for their effective reduction. Determining the suitability of the new cost allocation model

Results

In every business system, accounting is a service activity that is required to help those who strive for the company's success on the one hand to make business decisions and on the other hand to determine what the financial situation is within the business system itself. Thus, we can say that accounting is the language through which economic information is conveyed to those who are interested in it. This information is needed primarily by the management of the business system and the owners, but also by employees, the state, credit providers, customers and suppliers, and others.

It is very important that accounting provides effective information needed by various users at the lowest possible cost. This is also one of the reasons why it is necessary in accounting to focus on relevant information, on that which is useful to the user. As useful, we can define that information which facilitates business decisions in any respect.

However, every decision is directed towards the future. Accounting budgets, which are the basis for decision-making in planning, are becoming increasingly important, whilst accounting statements must be subordinated to the needs of control as a function of decision-making. The organisation and structure of cost accounting and cost centre accounting varies from company to company, as each company adapts cost centre accounting to its own needs and the specifics of its operations.

Ever-increasing competition and the struggle for survival place companies and their management before the fact that they must support their decisions with numerous analyses and research. Most new ideas and upgrades bring certain costs that need to be covered by revenues. Therefore, planning is just as important in a company as the operations themselves, through which the company sets certain optimal goals that it then tries to achieve and exceed.

Thus, every activity within the company is directed towards achieving plans, which are the result of the work of employees and individuals. Correct decisions are reflected both at the highest level (in the profit and loss account) and at the lowest level (in monitoring and controlling costs). The foundation for effective and successful company operations, in addition to revenues, is also a good knowledge of costs, accuracy and timeliness of planning, monitoring and control, appropriate definition of cost centres, and a well-considered choice of the cost accounting method itself, which among other things also includes an appropriate choice of keys for the allocation of general costs.

In the company DUMIDA, we can say that cost accounting has developed over the years of operation. Recently, they have devoted quite a lot of attention to this. The company was forced to do so by the expansion of already established activities as well as the introduction of new ones, which is why the need for cost centre accounting is ever greater.

For the purposes of cost control and information acquisition, it is sensible to consider the possibilities of how to upgrade the information system so that costs can be monitored as appropriately as possible, which will enable the company to plan and control more easily. In this regard, the formation of responsibility centres and the study of methods for cost allocation that will be more transparent, whilst at the same time enabling easier and faster decision-making, are not insignificant. By upgrading the information system and introducing a new method of cost capture, it would be possible to enable users to produce reports that would be more effective and, above all, more rational.

Reports for internal users would need to be harmonised with reports for external users. It is my opinion that the theory of costs and cost centres has been comprehensively addressed in the diploma thesis. In the practical part, costs by natural types are presented according to the impact of business effects for individual, already formed cost centres.

The vehicle production activity is a new cost centre that is envisaged within vehicle sales and will be formed in the future. The formed information includes only those cost centres for which data were available at the time of preparing the diploma thesis. If one wished to analyse cost sub-centres as well, the data would need to be estimated, which was not the purpose of the work.

If information is being prepared for a known user, it is necessary to know what it is intended for. Therefore, when preparing information for decision-making within the company, both in terms of the choice of information and the form of its transmission, the need and not the regulation is important. There are only two requirements when preparing this information: that the person making the decision understands the information, and that the person preparing it knows what it will be used for.

Otherwise, the producer and the user of the information do not understand each other. The consequence of this can be an incorrect business decision. The findings in the diploma thesis could be used by the company DUMIDA to decide on harmonising the methodology for preparing information and upgrading the information system.

By rationalising business monitoring, the company would more easily determine business results and, ultimately, more easily compare the achieved results both between activities within the company itself and between companies in the group. If management is the affair of the owners, and they do not make decisions based on accounting information, which in the Western world is designated as management accounting, then accounting that satisfies their needs is certainly no longer appropriate to designate simply as 'management accounting'. If management accounting is accounting for internal decision-making in the company, it is necessary to know that such decision-making is primarily the affair of all those who are embedded in hierarchical levels from management to lower levels of management and who at the highest level are accountable to the owners (Turk, Kavčič, Kokotec-Novak, 1997, 6).