Total Cost Principles in a Product and Production Development Context

In product and production development projects, companies often make decisions based on simplified economic models. In practice this facilitates decision making concerning the individual projects, and as a result enhance speed and progress at the project level. However, the consequences often are that the decisions made with respect to an individual project are less than optimal for the overall financial performance of the company. As regards decisions pertaining to internal projects and projects of limited scope, companies have defended the existing practice by underscoring that it enabled them to make fast, though approximate calculations. As the scopes of many projects become broader, this practice has become inadequate. This is particularly true of projects addressing the development of modular product families as well as projects concerning in- or outsourcing of production as well as product development. read more This project aims to develop financial evaluation models that facilitate the decision making process, providing decision makers with a range of additional dimensions to apply in projects such as those mentioned above. New management accounting techniques must therefore be developed to satisfy the need for this kind of information.   One initial idea is to use an extended version of Activity Based Costing as a technique to calculate the cost effects of production changes and product development. read more Project contact persons: Associate professor Poul H.K. Hansen, CIP; Professor Poul Israelsen, CIP; ph.d.-student Brian V. Jørgensen, Aarhus School of Business and Research Assistant Jesper Thyssen, CIP. The project group will seek to establish a national network of companies working within the field of total cost. Project duration: 2003 to 2006