SHADOW COSTING 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 Presenter • Mr Ken Leigh CD resources Accountant & Barrister-at-Law Bringing People Together To develop responses to the community’s needs for transport, access and mobility 1
SHADOW COSTING 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 of all resource inputs exchanged or sacrificed to achieve an organisational, service, program or activity. Bringing People Together To develop responses to the community’s needs for transport, access and mobility 2
SHADOW COSTING 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 Bringing People Together To develop responses to the community’s 3 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Why costing is increasingly important Bringing People Together To develop responses to the community’s 4 needs for transport, access and mobility 4
SHADOW COSTING Enhancing Viability Series Think Tank Competitive tendering: value for money Bringing People Together To develop responses to the community’s 5 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Exampling relationship between costing and pricing Bringing People Together To develop responses to the community’s needs for transport, access and mobility 6
SHADOW COSTING Enhancing Viability Series Think Tank Cost Centres – Pyramid of abstraction Bringing People Together To develop responses to the community’s 7 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Shadow costing – exampling volunteer hours Bringing People Together To develop responses to the community’s 8 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank 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 Bringing People Together To develop responses to the community’s 9 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Example: Benchmarking unit costs Bringing People Together To develop responses to the community’s 10 10 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Example: Benchmarking unit costs Bringing People Together To develop responses to the community’s 11 11 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank CD resources Bringing People Together To develop responses to the community’s 12 12 needs for transport, access and mobility
SHADOW COSTING Enhancing Viability Series Think Tank Final Questions? Further contact: Mobile: 0429 110085 Email: barrister@d2.net.au Thank you Ken Leigh Bringing People Together To develop responses to the community’s 13 13 needs for transport, access and mobility
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