Cost Management and Control Seminar
The Holcim Group and Its Costing System
suppliers of
cement
aggregates (crushed stone, sand
and gravel)
ready-mix concrete and asphalt
Related services.
70 countries on all continents,
90,000 employees
2006 Revenues: $ 21,825 M
Group B31 Aldo Gallo Cáceres - Félix Morán Subía - Thiago Macitelli
Holcim Group Figures and Value Chain
Established Markets
Emergent Markets
+ 480%
+ 1050%
1980 Employees 18734
1980 Revenues $ 2,209 M
2006 Revenues: $ 21,825 M
2006 Employees 90000
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Cost Management and Control
Cement Production Process
Main Cost Center Classification
Main Cost
Accounts
Corporate
Corporate
Marketing
Manufacturing
Logistics
& Sales
Administration
Code: 100
RM Extraction
Code: 500
Code: 300
Cement Grinding
RM Preparation 2
Code: 200
Code: 400
Code: 600
RM Preparation 1
Clinker Production
Dispatching (no main)
Pre-process Cost Centers:
Auxiliary Cost Centers:

Correctives.

Alternative Raw Materials.

Gypsum and additives.

Alternative Fuels.

Mineral Components.

Power Generation.
Cost Management and Control
3
Costing System
Process Costing
Major Guides of the Costing System:
Employee`s input:
 Cost Centers.
 Accounts codification.
 General required description of the movement.
The accounting software (SAP):
 It has an internal assignation process, accounts are already internally tagged as: variable
cash cost, Fixed cash cost, and others related.
Key Issue: (Employee's Main Role for the success of the Costing System)
Right Assignation of accounts and cost centers.
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Cost Management and Control
Cost Drivers
$20,000,000
Main Information
Behind
$15,000,000
 Cost center’s
$10,000,000
impacts on total cost
 Relevant costs
$5,000,000
 Main opportunities
for cost reductions.
$-
Raw
eria
Ma t
t rac
l Ex
tion
Raw
eria
Ma t
n
ati o
par
e
r
ls P
M
Raw
eal
ke
Clin
Depreciation
odu
r pr
Fixed cost
n
ctio
ing
r ind
g
t
en
Cem
Variable cost
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Cost Management and Control
How to Choose a Costing System
 An accounting system established to monitor a company's costs, providing
management with information on operations and performance.
 Process costing




 Job Order costing
High volume
Are identical
identical amount of direct labor
Repetitive operations




typically low volume
Tend to be unique (custom order)
different amount of direct material
different amount of direct labor
Work in Progress
Work in Progress
Process A
Process B
Process C
Finished
Goods
Stock
Process A
Process B
Process C
Finished
Goods
Stock
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Cost Management and Control
Decision making planning and control process
1. Identify objectives
2. Search for alternatives courses of action
Cost drivers
Planning
process
3. Gather data about alternatives
4. Select alternative courses of action
e.g. Process improvement,
change raw materials, etc.
5. Implement the decisions
Control Process
6. Compare actual and planned outcomes
7. Respond to divergences from plan
Performance indicators
Adjust the plans
From: Drury (2004). Management and cost accounting. 6th edition. ISBN 978-1-84480-703-1
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Cost Management and Control
Decisions Making Process Using Costing System
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Cost Management and Control
Decisions Making Process Using Costing System
9
Cost Management and Control
Possible decisions
 Process improvement (e.g. reduce the number of stops
by increasing preventive maintenance)
 Change fuel supplier to reduce costs
 After selecting and implementing the decisions they
performance has to be monitored in the same way
 The new performance indicators could be compared
with the previous period
 If necessary, corrective action plans could be taken
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Cost Management and Control