Absorption Costing Sequence Determination via Hierarchical Repositioning
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Complex scenarios in manufacturing and distribution, involving multiple subassemblies and cost groups, complicate the determination of absorption costing sequences, leading to a high number of operations required for accurate valuation and analysis.
Innovation Solution
A computer-implemented method and system that creates an initial hierarchy from a bill of materials and iteratively repositions items to determine an absorption costing sequence, reducing the number of operations needed for subsequent absorption costing by positioning parent items above their children, thereby simplifying the costing process.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If traditional absorption costing methods are used for complex manufacturing scenarios with multiple subassemblies and cost groups, then accurate valuation and analysis can be achieved, but the number of operations required becomes very large
Solution Approach 1:
The patent applies preliminary action by creating a modified hierarchy structure before performing absorption costing. The system repositions parent items above their children items in the hierarchy tree, establishing an optimal costing sequence in advance. This preliminary reorganization reduces the number of operations needed during the actual costing process, as the system no longer needs to perform complex real-time sequencing calculations for each costing operation.
2Measurement precision
If software performs necessary operations to determine average cost and optimal sequencing for each item, then accurate absorption costing is achieved, but the complexity of the process increases significantly
Solution Approach 1:
The patent applies segmentation by dividing the costing process into distinct phases: hierarchy creation, iterative repositioning, and final costing execution. The system segments the complex sequencing problem into manageable steps where parent-child relationships are established and maintained separately. This segmentation simplifies the overall process complexity while maintaining accurate cost determination.
Solution Approach 2:
The system performs preliminary repositioning of items in the hierarchy to establish the optimal costing sequence before actual costing operations. By pre-organizing the hierarchy structure with parent items positioned above their children, the system eliminates the need for complex real-time sequencing during costing, thereby reducing process complexity while maintaining accuracy.
3Adaptability or versatility
If items appear in multiple levels within the bill of materials and are transferred between multiple cost groups, then comprehensive cost coverage is achieved, but the number of operations that software must perform becomes very large
Solution Approach 1:
The patent applies dynamics by implementing an iterative repositioning process that dynamically adjusts the hierarchy structure. The system repeatedly accesses items, identifies their children, and repositions parent items above their children until convergence is achieved. This dynamic adaptation handles items appearing in multiple levels and cost groups efficiently, as the iterative process automatically resolves complex relationships without requiring a fixed, predetermined sequence.
Data Source
AI summary
Embodiments of the present invention are directed to a method and system for determining an absorption costing sequence for items in a business operation. More specifically, embodiments provide an efficient mechanism for sequencing items for absorption costing, thereby also improving the efficiency of subsequent absorption costing mechanisms by reducing the number of sequencing operations performed during costing. In one embodiment, an initial hierarchy is created from a bill of materials (BOM) including items for which an absorption cost will be calculated. Thereafter, an iterative method is performed to modify the initial hierarchy and reposition each parent item at a level above all of the children items corresponding to the parent item. An absorption processing sequence for the items is then determined from the modified hierarchy. As such, all items may be efficiently repositioned before absorption costing is performed.