An analysis of material flow cost accounting in companies using different cost accounting systems.

Abstract

Material Flow Cost Accounting[MFCA] is a tool of environmental management accounting that anticipates the quantitative and monetary tracking of waste generated in production processes. Reporting waste in quantitative terms holds significance in emphasizing its environmental impacts while calculating the cost of waste is crucial in revealing the cost incurred by waste generation for production companies. This study aims to analyse MFCA from the perspective of companies operating in the same region but utilizing different cost accounting systems. By examining two cases side by side, it is aimed to identify similarities and differences in practices. This paper further investigates potential challenges in implementing MFCA through an analysis of two companies: one employing a process costing system and the other employing a job order costing system. The first case study was conducted in a company engaged in powder coating production using a job order costing system, while the second case study was carried out in a company engaged in sunflower oil production employing a process costing system. MFCA was effectively implemented in both companies, revealing the cost of waste, additional costs incurred due to waste recycling, and the potential for savings. The results of Case Study 1 showed that the costs of products and material losses are 92.90 % and 7.10 %, respectively. The Case Study 1 also revealed that MFCA can be dynamically applied within the job order costing system during the production period due to the system's ability to directly track material and other resource usage, enabling detailed efficiency analyses for each individual order. The results of Case Study 2 indicated that products in QC(Quantity Center) 1 are 99.80 % of total outputs. However, this ratio includes by-products, which is 55.1 % of total outputs. In QC2, products account for 90.77 % of total outputs, while 9.23 % of them are material losses. The Case Study 2 revealed the shortcomings of MFCA in evaluating by-products.