SHADOW COSTING Enhancing Viability Series Think Tank Objectives - - PowerPoint PPT Presentation

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

Objectives

• Defining costing
• Share our understanding of costs
• Full-cost unit costing increasingly important
• Exploring the role of shadow costing
• Cost v value for money
• Relationship costing and pricing
• Importance of detailed cost centres
• Exampling shadow costing
• Exampling apportioning costs
• Benchmarking unit costs
• CD resources

1 Presenter Mr Ken Leigh Accountant & Barrister-at-Law

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

Costing explained

Cost is the exchange/sacrifice value (usually valued in $) of resources necessary to acquire another input resource in achieving an organisational goal. Examples: time, labour, equipment, commitment, risk. Cost classification is where a cost is given one or more labels to describe the various behaviours of that cost. Examples: fixed cost, variable cost, capital cost, direct cost, indirect cost, monetary cost, imputed cost. Full-cost is the true total value of ALL elements in acquiring the input resource irrespective of whether “paid” historically or in the future and whether “cash” or “shadow” priced. Costing involves detailed identification, categorisation, measurement and valuation

• f all resource inputs exchanged or sacrificed to achieve an organisational,

service, program or activity. 2

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

Why costing is increasingly important

Australian Government – Productivity Commission research report “Contribution of the Not-For-Profit Sector” – 2010. Chapter 3 “A Measurement Framework” - Figure 3.1 page 35

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SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

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Why costing is increasingly important

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

Competitive tendering: value for money

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SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

6

Exampling relationship between costing and pricing

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

7

Cost Centres – Pyramid of abstraction

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

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Shadow costing – exampling volunteer hours

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

9

Exercise: apportioning costs

Cost Centre

• No. staff

% floor space Annual revenues Program #1 4 10% $100,000 Program #2 10 60% $250,000 Corporate Services 6 30% $ 50,000 Total 20 100% $400,000

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

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Example: Benchmarking unit costs

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

11 11

Example: Benchmarking unit costs

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

12 12

CD resources

SHADOW COSTING

Bringing People Together

To develop responses to the community’s needs for transport, access and mobility

Enhancing Viability Series Think Tank

13 13

Final Questions?

Further contact: Mobile: 0429 110085 Email: barrister@d2.net.au

Thank you Ken Leigh