Abstract:

Internal cost accounting, the allocation of costs to production units, in recent years has been widely employed by the management in mining companies as a managerial tool. This method has been proven effective in reducing production costs and hence improving business results. However, the fact that a number of issues have appeared in practice gives rise to questions such as “Is it necessary to deepen the level of cost accounting?”, “If yes, to what extent?”, “What are the criteria for selecting the level of costs for accounting?”, and “What are the potential challenges in doing so and how to resolve them?”. This article discusses the extent to expand the scope of cost counted for the business units viewed from different perspectives in cost management, and some technical problems allocating costs. The purpose of this discussion is to provide a foundation to aid the management in their decision making process with regards to the range of costs included the portfolio of costs for the unit. In addition, the article also suggests different methods of allocating certain types of costs which is considered most difficult in practice. Those methods include depreciation expenses of fixed assets in the factories, repair and maintenance costs of machinery factory, and the cost of materials for long-term use that cannot be counted all at once into product costs. Each method corresponds with a different level of depth and firm’s conditions so that firms can choose one that suits their conditions the best