Management innovation and cost accounting

Just-in-time (JIT) inventory systems and automated factories will simplify inventory costing for financial reporting, but they will complicate unit costing for strategic decision making. JIT systems eliminate the need to separate the cost of manufactured goods into raw materials, work in progress, finished goods inventory, and cost of goods sold. Cost control in the future will be achieved by the direct control of cost-generating activities instead of standard cost systems. Recordkeeping complexity can be reduced by eliminating the use of work orders and detailed tracing of costs. Automation of production causes labor costs to be treated as variable overhead like other variable costs that are difficult to account on a unit basis. Flexible manufacturing causes unit costing to be replaced by the valuation and profitability of batches of products.