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Equivalent cost accounting | Free template

Equivalent cost accounting is a free template to create a periodic cost calculation for several products that use and consume the same resources in a given period. Equivalent cost accounting is specially adapted for process industries such as brickworks, sawmills and pulp companies.

Equivalent cost accounting is a periodic method in which the calculation is based on the total cost for a certain period, such as a month or a year. In equivalent cost accounting, the total cost is allocated to objects depending on how much resources they have used in the production process. The cost allocation in equivalent cost accounting is done by utilizing equivalent size for different products. Equivalent size is the equivalent number multiplied by volume.

Equivalent numbers should respond to how much resources objects is using in relation to each other in the production process. If we have two products, one which consumes twice as much as the other product we can give the first product an equivalent number of 2 and the other product a equivalent number of 1.

Equivalent cost accounting can be used both as preliminary calculation and as a control calculation after the production is finished. Equivalent cost accounting can form a basis for pricing decisions, inventory valuation or profitability analysis. Equivalent cost accounting calculations are easy to do and to maintain but still gives good causality when equivalent numbers and volume gives a fair distribution of costs to the objects.

You can use this template to create an equivalent cost accounting calculation for products that use the same resources in a period.
Updated: 01-01-2015 | Created by All-templates.biz

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Tags: products decision making cost calculations excel spreadsheet