A NOTE ON THE ESTIMATION OF REPLACEMENT COST FOR A JOB

A study was conducted which uses standard cost variance analysis in estimating in the form of a job the replacement cost of a manufactured item. The key aspect of this study is to link material and labor costs to a specific job. Replacement cost can be defined as either the cost of replacement durin...

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Bibliographic Details
Published in:Journal of business finance & accounting 1979-03, Vol.6 (1), p.37-43
Main Author: GEE, KENNETH P.
Format: Article
Language:English
Subjects:
Absorption costing
Costing
Job
Manufactured products
Replacement costs
Variance analysis
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Summary:A study was conducted which uses standard cost variance analysis in estimating in the form of a job the replacement cost of a manufactured item. The key aspect of this study is to link material and labor costs to a specific job. Replacement cost can be defined as either the cost of replacement during the last production cycle or the cost at the present point in time. In comparing the 2 approaches, it will be assumed that only the cost of inputs change, and, therefore, productivity is assumed constant over the cycle.The difference in cost between the 2 approaches is defined in terms of the different types of material and labor used and the differential between actual and standard costs of a unit of labor and material. The analysis tends to support the use of replacement cost developed under the assumption that replacement is made at the present time. Using this approach, the price of purchased materials may need to be adjusted.
ISSN:0306-686X
1468-5957
DOI:10.1111/j.1468-5957.1979.tb01067.x