A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs

Kulikova Tatyana Andreevna; Kirikutsa Elena Gennadievna; Sinyavin Vladimir Yurievich; Bareeva Irkyam Adgamovna

doi:doi:10.11648/j.eco.20231203.12

| Peer-Reviewed

A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna

Published in Economics (Volume 12, Issue 3)

Received: 5 May 2023 Accepted: 19 July 2023 Published: 1 September 2023

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.

Published in	Economics (Volume 12, Issue 3)
DOI	10.11648/j.eco.20231203.12
Page(s)	93-104
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2023. Published by Science Publishing Group

Keywords

Overhead Costs, Cost Management, Rationing, Standard Factor of Overhead Costs, Goal Setting, Innovation

References

[1]	Ahmed, K. and Jinan, M. (2011). The association between research and development expenditure and firm performance: testing a life cycle hypothesis. International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), vol. 7, no. 4, pp. 267–286. doi: 10.1504/IJAAPE.2011.042771.
[2]	Negodnova, E. P. (2016). Comparative characteristic of accounting for overhead costs in domestic and foreign practice. Available at: http://kontentus.ru/wp-content/uploads/2016/03/Негоднова-Е.-П.pdf (accessed 10 March 2023).
[3]	Avelé, D. (2015). The problematic of imputing joint costs in management accounting for organisations: reviewing state of the art practices. International Journal of Economics and Accounting (IJEA), vol. 6, no. 2, pp. 150–167. doi: 10.1504/IJEA.2015.069908.
[4]	Ganorkar, A. B., Lakhe, R. R. and Agrawal, K. N. (2017). Cost estimation techniques in manufacturing industry: concept, evolution and prospects. International Journal of Economics and Accounting (IJEA), vol. 8, no. ¾, pp. 303–306. doi: 10.1504/IJEA.2017.10013472.
[5]	Brierley, J. A. (2015). An examination of the factors influencing the inclusion of non-manufacturing overhead costs in product costs. International Journal of Management and Financial Accounting (IJMFA), vol. 7, no. 2, pp. 134–150. doi: 10.1504/IJMFA.2015.071195.
[6]	Brierley, J. A. (2013). The uses of product costs in decision-making. International Journal of Management and Financial Accounting (IJMFA), vol. 5, no. 3, pp. 294–309. doi: 10.1504/IJMFA.2013.058551.
[7]	Dwivedi, R. and Chakraborty, Sh. (2015). An activity-based costing model for an engineering department of an Indian university. International Journal of Accounting and Finance (IJAF), vol. 5, no.1, pp. 62–81. doi: 10.1504/IJAF.2015.067688.
[8]	Ryzhkova, M. N. (2016). Theoretical and methodological approaches to cost management in the enterprise. Available at: https://cyberleninka.ru/article/n/teoretiko-metodicheskie-podhody-k-upravleniyu-zatratami-na-predpriyatii (accessed 10 March 2023).
[9]	Application of Direct Costing System in Russia. Available at: https://vuzlit.ru/671723/primenenie_sistemy_direkt_kosting_rossii (accessed 14 March 2023).
[10]	Bulatov, A. S. et al (Eds.), (2009). Economics: a textbook, Yurist, Moscow.
[11]	Kulikova, T. A. and Luzgina, O. A. (2014a). A standard-factor in industrial enterprise management. University Proceedings. Volga Region. Social Sciences, vol. 2, no. 30, pp. 214–220. Available at: https://izvuz_on.pnzgu.ru/files/izvuz_on.pnzgu.ru/23.pdf (accessed 10 March 2023).
[12]	Sokolov, A. Yu. (2004). Management Accounting of Overhead Costs, Finance and Statistics, Moscow.
[13]	Batalov, D. A. and Rybyantseva, M. S. (2011). Methods and tools of the operating and strategic controlling. Scientific Journal of KubSAU, vol. 67, no. 3, pp. 1–19. Available at: https://cyberleninka.ru/article/n/metody-i-instrumenty-operativnogo-i-strategicheskogo-kontrollinga (accessed 1 March 2023).
[14]	Drury, C. (2003). Management Accounting for Business Decisions: a textbook, UNITY-DANA, Moscow.
[15]	Kozhevnikova, E. (2011). Standard methods in management and planning. The Economist’s Handbook, vol. 8, pp. 47–54. Available at: https://www.profiz.ru/se/8_2011/normativ_metody_planirov/ (accessed 5 March 2023).
[16]	Kulikova, T. A. and Luzgina, O. A. (2014b). SMART standards as a core competence of industrial enterprise engaged in innovation activities. Russian Economic Online Magazine, no. 2. Available at: http://www.e-rej.ru/publications/154/ (accessed 2 March 2023).
[17]	Kulikova, T. A. and Luzgina, O. A. (2015). A methodical approach to optimization and application of a standard factor of overhead costs as a tool to manage an industrial enterprise. Available at: http://catalog-statei.ru/view_article.php?id=636 (accessed 9 March 2023).
[18]	Drury, C. (2007). Management and Cost Accounting: a student manual, 6th ed., UNITY-DANA, Moscow.
[19]	Abuashour, A. (2023). An efficient Clustered IoT (CIoT) routing protocol and control overhead minimization in IoT network. Internet of Things, vol. 23, 100839. doi.org/10.1016/j.iot.2023.100839.
[20]	Abraham, D. et al. (2023). Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost. Journal of Economic Behavior and Organization, vol. 211, pp. 287-304. doi.org/10.1016/j.jebo.2023.05.006.
[21]	Bankera, R. D., Potter, G. and Schroeder R. G. (1995). An empirical analysis of manufacturing overhead cost drivers, Journal of Accounting and Economics. vol. 19, no. 1, pp. 115-137. doi.org/10.1016/0165-4101(94)00372-C.
[22]	Lere, J. C. (2001). Your Product-costing System Seems to Be Broken: Now What? Industrial Marketing Management, vol. 30, issue. 7, pp. 587-598. doi.org/10.1016/S0019-8501(99)00124-8.
[23]	Homburg, C. (2004). Improving activity-based costing heuristics by higher-level cost drivers. European Journal of Operational Research, vol. 157, issue. 2, pp. 332-343. doi.org/10.1016/S0377-2217(03)00220-0.
[24]	Brierley, J. A., Cowton, C. J. and Drury, C. (2006). A comparison of product costing practices in discrete-part and assembly manufacturing and continuous production process manufacturing. International Journal of Production Economics, vol. 100, issue. 2, pp. 314-321. doi.org/10.1016/j.ijpe.2004.12.020.
[25]	Bent, K. and Caplan, D. (2017). Lattice allocations: A better way to do cost allocations. Advances in Accounting, vol. 38, pp. 99-105. doi.org/10.1016/j.adiac.2017.07.008.
[26]	Roztocki, N. (2003). The integrated activity-based costing and economic value-added system for the service sector. International Journal of Services Technology and Management, vol. 4, no. 4-6, pp. 494-506. doi.org/10.1504/IJSTM.2003.003628.
[27]	Rogozhin, A. et al. (2010). Using indirect cost multipliers to estimate the total cost of adding new technology in the automobile industry. International Journal of Production Economics, vol. 124, issue. 2, pp. 360-368. doi.org/10.1016/j.ijpe.2009.11.031.
[28]	Chiadamrong, N. and Wajcharapornjinda, P. (2012). Developing an economic cost model for quantifying supply chain costs. International Journal of Logistics Systems and Management, vol. 13, no. 4, pp. 540-571. doi.org/10.1504/IJLSM.2012.050171.
[29]	Chao, L.-C. and Kuo, C.-P. (2016). Probabilistic Approach to Determining Overhead-cum-markup Rate in Bid Price. Procedia Engineering, vol. 164, pp. 243-250. doi.org/10.1016/j.proeng.2016.11.616.
[30]	Leśniak, A. and Juszczyk, M. (2018). Prediction of site overhead costs with the use of artificial neural network based model. Archives of Civil and Mechanical Engineering, vol. 18, issue. 3, pp. 973-982. doi.org/10.1016/j.acme.2018.01.014.
[31]	Duran, O. and Afonso, P. S. L. P. (2020). An activity based costing decision model for life cycle economic assessment in spare parts logistic management. International Journal of Production Economics, vol. 222, 107499. doi.org/10.1016/j.ijpe.2019.09.020.
[32]	Sajadfar, N. and Ma, Y. (2015). A hybrid cost estimation framework based on feature-oriented data mining approach. Advanced Engineering Informatics, vol. 29, issue. 3, pp. 633-647. doi.org/10.1016/j.aei.2015.06.001.
[33]	Pehrsson, L., Nga1, A. H. C. and Stockton, D. (2013). Industrial cost modelling and multi-objective optimisation for decision support in production systems development. Computers & Industrial Engineering, vol. 66, issue. 4, pp. 1036-1048. doi.org/10.1016/j.cie.2013.08.011.
[34]	Huo, Y. et al. (2010). Modelling and simulation of stock-out cost pulled collaborative supply chain planning. International Journal of Modelling in Operations Management, vol. 1, no. 1, pp. 3-28. doi.org/10.1504/IJMOM.2010.035253.
[35]	Preetha, K. G. and Unnikrishnan, A. (2019). Reduction of overhead in routing protocols for MANET using fuzzy set-based decision making. Reduction of overhead in routing protocols for MANET using fuzzy set-based decision making, vol. 21, no. 1, pp. 89-100. doi.org/10.1504/IJNVO.2019.101150.
[36]	Stadtherr, F. and Wouters, M. (2021). Extending target costing to include targets for R&D costs and production investments for a modular product portfolio—A case study. International Journal of Production Economics, vol. 231, 107871. doi.org/10.1016/j.ijpe.2020.107871.
[37]	Kee, R. (2010). The sufficiency of target costing for evaluating production-related decisions. International Journal of Production Economics, vol. 126, issue. 2, pp. 204-211. doi.org/10.1016/j.ijpe.2010.03.008.
[38]	Anderson, S. W. (2006). Managing Costs and Cost Structure throughout the Value Chain: Research on Strategic Cost Management. Handbooks of Management Accounting Research, vol. 2, pp. 481-506. doi.org/10.1016/S1751-3243(06)02001-3.
[39]	Pettersson, A. I. and Segerstedt, A. (2013). Measuring supply chain cost. International Journal of Production Economics, vol. 143, issue. 2, pp. 357-363. doi: 10.1016/j.ijpe.2012.03.012.
[40]	Rybakov, D. S. (2017). Total cost optimisation model for logistics systems of trading companies. International Journal of Logistics Systems and Management, vol. 27, no. 3, pp. 318-342. doi.org/10.1504/IJLSM.2017.084469.
[41]	Khataie, A. H., Bulgak, A. A. and Segovia, J. J. (2012). An innovative application of activity–based costing and management in decision support modelling. International Journal of Engineering Management and Economics, vol. 2, no. 4, pp. 369-392. doi.org/10.1504/IJEME.2011.045432.
[42]	Brierley, J. A., Cowton, C. J. and Drury, C. (2008). An examination of the types of cost system used to obtain product costs in British manufacturing industry. International Journal of Managerial and Financial Accounting, vol. 1, no. 1, pp. 6-17.doi.org/10.1504/IJMFA.2008.020458.

Cite This Article

Plain Text BibTeX RIS

APA Style

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna. (2023). A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics, 12(3), 93-104. https://doi.org/10.11648/j.eco.20231203.12

Copy | Download

ACS Style

Kulikova Tatyana Andreevna; Kirikutsa Elena Gennadievna; Sinyavin Vladimir Yurievich; Bareeva Irkyam Adgamovna. A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics. 2023, 12(3), 93-104. doi: 10.11648/j.eco.20231203.12

Copy | Download

AMA Style

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna. A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics. 2023;12(3):93-104. doi: 10.11648/j.eco.20231203.12

Copy | Download

@article{10.11648/j.eco.20231203.12,
  author = {Kulikova Tatyana Andreevna and Kirikutsa Elena Gennadievna and Sinyavin Vladimir Yurievich and Bareeva Irkyam Adgamovna},
  title = {A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs},
  journal = {Economics},
  volume = {12},
  number = {3},
  pages = {93-104},
  doi = {10.11648/j.eco.20231203.12},
  url = {https://doi.org/10.11648/j.eco.20231203.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20231203.12},
  abstract = {Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs
AU  - Kulikova Tatyana Andreevna
AU  - Kirikutsa Elena Gennadievna
AU  - Sinyavin Vladimir Yurievich
AU  - Bareeva Irkyam Adgamovna
Y1  - 2023/09/01
PY  - 2023
N1  - https://doi.org/10.11648/j.eco.20231203.12
DO  - 10.11648/j.eco.20231203.12
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 93
EP  - 104
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20231203.12
AB  - Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.
VL  - 12
IS  - 3
ER  -

Copy | Download

Author Information

Kulikova Tatyana Andreevna

The Department of Economics and Management, I. M. Sechenov First Moscow State Medical University (Sechenov University), Moscow, Russian Federation
Kirikutsa Elena Gennadievna

The Department of Economics and Management, I. M. Sechenov First Moscow State Medical University (Sechenov University), Moscow, Russian Federation
Sinyavin Vladimir Yurievich

The Department of Management and Economic Security, Penza State University, Penza, Russian Federation
Bareeva Irkyam Adgamovna

The Department of Management and Economic Security, Penza State University, Penza, Russian Federation

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna. (2023). A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics, 12(3), 93-104. https://doi.org/10.11648/j.eco.20231203.12

Copy | Download

ACS Style

Kulikova Tatyana Andreevna; Kirikutsa Elena Gennadievna; Sinyavin Vladimir Yurievich; Bareeva Irkyam Adgamovna. A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics. 2023, 12(3), 93-104. doi: 10.11648/j.eco.20231203.12

Copy | Download

AMA Style

Kulikova Tatyana Andreevna, Kirikutsa Elena Gennadievna, Sinyavin Vladimir Yurievich, Bareeva Irkyam Adgamovna. A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs. Economics. 2023;12(3):93-104. doi: 10.11648/j.eco.20231203.12

Copy | Download

@article{10.11648/j.eco.20231203.12,
  author = {Kulikova Tatyana Andreevna and Kirikutsa Elena Gennadievna and Sinyavin Vladimir Yurievich and Bareeva Irkyam Adgamovna},
  title = {A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs},
  journal = {Economics},
  volume = {12},
  number = {3},
  pages = {93-104},
  doi = {10.11648/j.eco.20231203.12},
  url = {https://doi.org/10.11648/j.eco.20231203.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.eco.20231203.12},
  abstract = {Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - A Methodical Approach to Optimization and Application of a Standard Factor of Overhead Costs
AU  - Kulikova Tatyana Andreevna
AU  - Kirikutsa Elena Gennadievna
AU  - Sinyavin Vladimir Yurievich
AU  - Bareeva Irkyam Adgamovna
Y1  - 2023/09/01
PY  - 2023
N1  - https://doi.org/10.11648/j.eco.20231203.12
DO  - 10.11648/j.eco.20231203.12
T2  - Economics
JF  - Economics
JO  - Economics
SP  - 93
EP  - 104
PB  - Science Publishing Group
SN  - 2376-6603
UR  - https://doi.org/10.11648/j.eco.20231203.12
AB  - Improvement of cost management methods is an urgent problem nowadays due to increasing size and share of overhead costs of enterprises in modern conditions. This paper proposes a methodical approach to overhead cost management to find a compromise between cost optimization and differentiation in terms of developing flexible standards that are connected with strategies and specific operating conditions of economic entities. The implementation of these tasks is based on studying the experience of applying and clarifying the category of overhead cost rationing, based on neoclassical and alternative evolutionary economic theories, the economy of the firm to calculate the overhead rate, and econometric methods for analyzing the cost factors of industrial enterprises. A developmental component of overhead costs was first distinguished in the proposed methodical approach. An algorithm to determine the effectiveness of the overhead cost standard factor in terms of compliance with the objectives of the enterprise has been developed. Practical recommendations for optimizing and using the features of the overhead cost standard factor to increase the efficiency of industrial enterprises have been offered. The use of the proposed methodological approach to standardizing overhead costs as a structural component of cost management systems based on norms will increase the reliability of implementing its following stages, develop well-founded norms that are adequate to the various goals of economic entities, focus attention on overhead costs, improve managerial accounting for economic entities, conduct flexible managerial policies, and productively carry out the managerial process.
VL  - 12
IS  - 3
ER  -

Copy | Download