SIMULATION-BASED MANUFACTURING ACCOUNTING FOR MODERN MANAGEMENT

Conventional cost accounting fails to provide manufacturers with relia ble cost information due to inability of counting the intangible cost, inaccuracy in calculating overhead, and failure in predicting lifecyc le costs. Therefore, manufacturers who consider factory automation hav e only two choices: either resort to erroneous cost systems only to ma ke wrong decisions, or ignore accounting numbers only to make risky de cisions. This paper develops a simulation-based manufacturing accounti ng (SBMA) model, an updated cost model for modern manufacturing manage ment. Unlike traditional backward and a posteriori accounting, which b acktracks historical costs for product costing, SBMA is forward and a prori accounting, which actively traces in real time the dynamic cost drivers (whether tangible or intangible) and predicts lifecycle costs through computer simulation. Therefore, SBMA can make significant cont ributions to manufacturing performance analysis, capital expenditure a nalysis, and manufacturing strategy assessment. Further, SBMA can comp lement existing product costing methods.