Project Management VII Research Paper
Shaun Webbs
ANewCostManagementSystemforConstructionProjectstoincreaseCompetitivenessandTraceabilityinaProjectEnvironment.pdf
Revista de Contabilidad Spanish Accounting Review 24 (1) (2021) 31-47
REVISTA DE CONTABILIDAD
SPANISH ACCOUNTING REVIEW
revistas.um.es/rcsar
A New Cost Management System for Construction Projects to increase Competitiveness and Traceability in a Project Environment
Hossein Toosi a, Arezou Chamikarpour a, b
a) Asistant Professor, Construction and Project Management Department, School of Architecture, University of Tehran. Tehran, Iran. b) Master of Construction and Project Management, Pars University. Tehran, Iran.
bCorresponding author. E-mail address: [email protected]
A R T I C L E I N F O
Article history: Received 11 January 2019 Accepted 17 September 2019 Available online 1 January 2021
JEL classification: D24 M11 L74
Keywords: Construction Projects Environment Project Cost Management Performance Focused Activity Based Costing Project Overhead Cost Competitive Cost
A B S T R A C T
This research proposed a new method for project cost management based on Competitiveness and traceab- ility in a case study and operational situation. The research hypothesis is based on the synergistic ability of performance focused activity based costing in combination of the target costing method for encouraging competitiveness cost control system for project environments. The method was developed to control, direct and overhead costs of the project during its progress. Also, it uses the feature of activity-driven and different resource drivers to determine the types of costs with the effect of time driver for each activity. An interview was conducted with financial managers during two to four times with the aim of validating and modify- ing the method. According to a semi-structured interview, the proposed method contributed to increase the precision, certainty, traceability of costs and provided the integrity of the accounting, technical and operational system. It also analyzes deviations and reduces costs by considering competitive and strategic conditions. Itś also limiting the target cost of work packages and causing an alarm on the completion of each. According to Friedman test, there is a meaningful competitive ability compared to the conventional cost control method in the projects and it is also implemented in a case study.
©2021 ASEPUC. Published by EDITUM - Universidad de Murcia. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Códigos JEL: D24 M11 L74
Palabras clave: Entorno de los proyectos de construcción Gestión de los costes de los proyectos Cálculo de costes por actividades centrado en el rendimiento Gastos generales de los proyectos Costes competitivos
Un nuevo sistema de gestión de costes de proyectos de construcción para aumentar la competitividad y la trazabilidad para entornos de proyectos
R E S U M E N
El objetivo principal de la investigación es utilizar nuevos métodos de cálculo de costes en los proyectos de construcción para reducir y controlar las desviaciones de costes y algunas limitaciones que presentan los modelos tradicionales. La hipótesis de la investigación se basa en la capacidad sinérgica del cálculo de costes basado en actividades centradas en el rendimiento, en combinación con el método de cálculo de costes objetivo para fomentar la competitividad del sistema de control de costes para entornos de proyectos. El método se elaboró para controlar los gastos directos y generales del proyecto durante su ejecución. Se realizó una entrevista con 26 directores financieros en dos o cuatro ocasiones entre junio de 2016 y mayo de 2017 con el fin de validar y modificar el método. Siguiendo una entrevista semiestructurada, el método propuesto contribuyó a aumentar la precisión, la certidumbre y la rastreabilidad de los costes y proporcionó la integridad del sistema contable, técnico y operacional. Además, se analizan las desviaciones y se reducen los costes al considerar las condiciones competitivas y estratégicas. También se limita el coste objetivo de los paquetes de trabajo y se genera una alerta al finalizar cada uno de ellos. Además, de acuerdo con el test de Friedman, existe una capacidad competitiva significativa en comparación con el método convencional de control de costes en los proyectos y también se aplica en un estudio de caso.
©2021 ASEPUC. Publicado por EDITUM - Universidad de Murcia. Este es un artículo Open Access bajo la licencia CC BY-NC-ND (http://creativecommons.org/licenses/by-nc-nd/4.0/).
https://www.doi.org/10.6018/rcsar.357961 ©2021 ASEPUC. Published by EDITUM - Universidad de Murcia. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc- nd/4.0/).
32 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
1. Introduction
Cost management in construction projects is important so that sometimes the success of the project is measured only by the cost criterion (Keisala, 2009). According to a study conducted in Qatar between 2000 and 2013, the cost overrun was about 54% (Senoucia, Ismailb & Eldina, 2016).
One of the growing demands of companies is the recogni- tion of cost and cost drivers and cost-driver behaviors. The indirect or overhead costs of the project are between 8% and 15% of total construction costs, which depends on the com- plexity of the project, where it can grow at a faster rate than direct costs. Large construction firms had a significant in- crease over 77% in overhead costs of the project and 9.8% unchanged and only 3.2% down (Jaya, 2013). Typically, the cost of construction projects is controlled by the accounting department, and due to the time interval in the accounting operation, there is a late reaction to circumstances. Also, the control of the Construction performance and cost and ac- counting have different and separate processes, and there is no integrated approach (Keisala, 2009).
Management accounting with strategic position leads to more accurate cost accounting and increases the organiza- tion’s performance (Macinati & Pessina, 2014) (Uyar & Kuzey, 2016). Unlike traditional retrospective accounting, manage- ment accounting is forward-looking and aimed at predicting the future and it helps managers to make operational and strategic decisions (Bai & Krishnan, 2012). In the traditional system Because of the limited feedback and lack reasonable time to make decisions, management controls are late and limited, and there is no integrity between the financial in- formation and the various information systems of the organ- ization (Castro Silva, Rocha & Oliveira Melo, 2014).
In the traditional approach, the costs with a direct impact on time are ignored, and since time lags have a significant negative impact on costs in construction projects, the separ- ation of cost control and scheduling has made it difficult to control the entire project cost, and time lags can easily lead to cost overrun (Shirowzhan, Shanaki, Sebt & Toosi, 2016). An- other issue we face with cost accounting is the lack of correl- ation between cost and performance systems (Uyar & Kuzey, 2016).
Competition in the construction industry is mainly shown at competitive prices (Tang, Zhang, Tang & Chen, 2015). In cost accounting does not set the target cost for each work- package. Also, the inability to track total costs and noting the permissible target cost by the system (Uyar & Kuzey, 2016).
The purpose of the research is to provide a cost control system for construction projects based on activity based cost- ing and the target costing in order to increase competitive- ness, accuracy, certainty and optimal management of over- head costs, profitability, continuous cost reduction and timely decision making.
2. Literature review
2.1. Problem statement: Cost Management Constraints in Construction Projects
Construction costs include direct and indirect costs. Direct costs include materials, manpower and equipment directly involved in construction and indirect costs are costs that can be set for a specific project, but cannot be determined for a specific part of the project, such as supervision, etc. (Singh & Taam, 2008). According to the PMBOK guide, cost man- agement includes planning, estimating, budgeting, financing,
fundraising, managing and controlling costs so that the pro- ject can be completed with a budget approved. In fact, cost management is a set of steps that management takes to en- sure more satisfaction and continuous control and cost re- duction. The emphasis of cost management systems is on company activities (Jaya, 2013).
In the traditional system, there is no causal relationship between costs and activities and components of work, also categories are based on consumed resources rather than user components and activities. Also, overhead costs are fixed at an expense and don’t have a causal relationship with con- struction activities, and there is little insight into the cost de- viations (Reddy, Venter & Olivier, 2012). On the other hand, most executives do not have an understanding of accounting reports because they are highly analytical and not related to services and products (Castro Silva et al., 2014). For four decades, the earned value management has been used to pre- dict and control the cost. Tools and techniques for managing and controlling costs, such as earned value management, de- scribe cost performance based on earned value (EV), planned value (PV), cost performance index (CPI), cost variance (CV) parameters. In this system, work breakdown structure (WBS) is used as a basic step to plan work. Along with the work breakdown structure, it uses organizational breakdown struc- ture (OBS) and then allocates organizational responsibilities to project works.
The Earned Value Management (EVM) system has inher- ent limitations that the past data are considered to be the best available information and also has many uncertainties at the early stages. Cost control and estimation and budgeting of remaining works are obtained based on past performance indicators, which can result in inaccuracies. Based on the earned values indicators, the cost deviation of each activity and project can be calculated for direct costs, and the man- agement, by examining any activity or accounting reports, can identifies roots and causes of the deviations. However, it takes time to review several reports with different control and accounting frameworks with their relation to physical progress. Regarding the EVM system, indirect costs is relat- ing to routine activities that cannot be specifically identified and interconnected between them and specific activities and projects, and indirect costs must be budgeted and controlled separately at the operational level or organizational manage- ment, and costs indirectly managed in overhead caches that are typically based on the organization’s accounting process (Alberto & Narbaev, 2013).
2.2. The target costing in construction projects
Target costing is a fundamental and effective tool for man- aging costs and reducing the cost of products. The target costing method is just the opposite of the traditional costing method and starts with sales prices. This method helps organ- izations to accurately cost estimate and reduce inadequate risk of profits, and develop better and faster products (Ba- harudina & Jusohb, 2015). In fact, the main purpose of the target costing is to estimate costs based on the goal pursued by the organization in a competitive environment. Each or- ganization can have its own methods, so the companies ex- press the following basic steps: Establishing the target price based on competition and market needs; Establishing the tar- get profit margin; Determining the cost to be obtained; Cal- culation of costs according to the process and methods avail- able; Calculation of the target cost (meaning the amount of the cost to be reduced). When the target cost is calculated, companies are following the below steps: Establishing a mul-
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tidisciplinary and multi-functional team that is in the early stages of design and planning, using tools such as value en- gineering in design and planning and kaizen costing during the construction to reduce costs (Melo & Granja, 2017). In fact, the main purpose of the target costing is to estimate costs based on the goal pursued by the organization’s com- petitive environment (Sharafoddin, 2016).
2.3. Performance Focused Activity based Costing in construc- tion projects
The basic logic of activity based costing is that the activ- ities consume resources and products consumes the activit- ies, which focuses on managing activities rather than costs (Ayorinde, Osarenren Osasrere & Ademola Adeniran, 2015). The activity-based costing system can also be described as an allocation method of overhead costs by a cost accounting methodology based on the cost driven activity to the activity pool and cost targets. This definition indicates that project overheads can be assigned to project activities based on cost drivers. Activities can be grouped into units, batch, projects, and facility-sustaining overheads (Jaya, Pathirage & Sutrisna, 2010).
Classifying activities can lead to the elimination of activ- ities without value-added. In fact, this method can provide useful information on resource consumption and cost goals for strategic decision making (Damjanovski, 2013). One of the distinction points of activity-based costing and traditional costing is in cost drivers. Due to the activity-driven nature of this method, the costs that are not considered in the tradi- tional method are calculated and also the total cost of the pro- ject is logically calculated (Tang et al., 2015). In this system, project overheads can be allocated to project activities based on cost drivers (Jaya et al., 2010). Of course, this method has limitations and shortcomings for use in construction projects. In this way, the activities are divided into four units, batches, projects, and facilities levels that are not commonly used in construction projects because work breakdown structure is more practical and tangible. Therefore, the activity-based costing process in overhead cost management in construction projects is as follows:
1. Identify project activities and scheduling theme. 2. Identifying project overheads and their cost accounts 3. Classify the overhead cost (unit, batch, project, facility)
and create a cause-and-effect relationship with activities.
4. Idealizing quantity drivers 5. Calculating ideal cost drivers 6. Allocation of cost accounts to activities (Cost objects.) 7. Determining activity driver rates of project overheads
per activity duration (Jaya, 2013).
The proposed method is suitable for overhead costs, but it has a long and complex process for tracking direct costs and does not consider competitive conditions. Based on the problems found in the activity-based costing model, Namazi in 2009 introduced a new generation of activity-based cost- ing that called performance focused activity based Costing (PFABC). This system can be integrated with the organiza- tion’s resource planning and performance management sys- tem. Also, in contrast to the classification of activities into four categories in the traditional ABC model, this method uses two types of flexible and committed costs, which has benefited from a simplified approach in the process of cal- culating the flexible (variable) costs. This system is used to
identify cost deviations such as rate and amount deviation. It is also a powerful technique for determining the productivity of activities or organization as a whole and is used to analyze two components of productivity, including efficiency and ef- fectiveness (Namazi, 2009; Namazi & Shamsedini, 2016).
2.4. Research background
In a study to provide accurate cost information and propor- tional with cost goals, a method for allocating costs with the help and improvement of the first-generation activity based costing method has been proposed which provides more ac- curate information than traditional method and the method of first-generation activity based costing has been facilitated and turned into one step (Bent & Kaplan, 2017). In a study that focuses on target costing in the Iranian market, states that target costing is a cost management tool to reduce costs especially in early design and product planning, which is used to determine competitive prices and customer require- ments. Also, the use of value engineering and activity based costing is essential for the successful implementation of the target costing (Sharafoddin, 2016). In another research, the target life cycle costing model has been proposed based on ABC model and states that the application of the target cost- ing and ABC methods in the manufacturing industry has brought the strategic benefits of TC and the functional bene- fits of ABC. In addition, with using techniques of cost-control, reduce costs and quality control, creates synergies in cost management and provides accurate information for proper decision making (Yuksel Pazarceviren & Dede, 2015). How- ever, the results of the research developed a model for process management system in the manufacturing industry and there is no evidence to contribute response differentiation between project management and process management (Toosi, Sebt & Maknoon, 2014). In another study, ABC’s application has been used in management efficiency, pricing decisions, im- proving decision-making processes in relation to maintaining or eliminating activities and adjusting pricing policies to in- crease product diversity, also Ranked above 80% that is help- ful and effective. Also, state that the application of the tar- get costing for pricing decisions, increasing customer satis- faction, and reasonable and quick decision making in manu- facturing plants is very appropriate and effective. Also, the skill in managing change to apply new costing methods is vital (Ayorinde et al., 2015). The use of the target costing in the construction industry has also been considered in dif- ferent countries. In a research to align the target costing in real-estate companies, it has developed a proposal for guid- ance. In this research, they have developed guidelines that started with the formulation of target costing and competit- ive price and continued to the level of components and selec- tion of key suppliers. And identifying opportunities and redu- cing costs based on value engineering (Melo & Granja, 2017). Martha Jaya in 2013 proposed a model for controlling over- head costs with using first-generation activity based costing in construction projects and calculating overhead costs for each activity based on cost drivers, and increasing accuracy and certainty in estimates and cost budgets and costs con- trol (Jaya, 2013). In Zimina, Glenn & Pasquire (2012), a target costing and lean methods has been used to design the target value on 12 construction projects, which aims at con- struction cost savings in the project’s delivery in terms of cost, time and quality. Applying the target value design in these projects has led to significant improvements in projects and reducing the final cost by 15% lower than market cost (Zim- ina et al., 2012). In another study, target costing has been
34 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
used to determine the cost of a building before design, and aims to manage the design process to achieve target costs. In this research, building information modeling (BIM) is used to construct all costs and components of a building before designing according to the needs of the employer and states that target costing leads to proposed value and reduces waste (Pennanen, Ballard & Haahtela, 2011). However, there is no specific research around cost control system constraints in project management for the construction industry. So, the paper developed based on two hypothesizes:
H1: There are differentiations between the project cost control system for the construction industry and process cost control system for the manufacturing industry.
H2: There is a synergistic ability to combine performance focused activity based costing and target costing method for encouraging competitiveness cost control system for project environments.
3. Research methodology
The current research has used a developmental method, since in the development research it is intended to innovate in methods, devices, products or to improve them. The re- search utilizes modern cost accounting techniques for provid- ing cost control systems in construction projects. Survey research is used qualitative, descriptive, and analytical re- search method since problem characteristics that face con- straints around cost control systems. Data collection and ana- lysis have benefited from library methodology, review of art- icles, books and research in related fields, but provide new evidence based on a semi-structured interview with experts on financial management in construction projects and with full proficiency in the areas of research, validated and re- ceived expert opinions and improved the proposed method. The criteria for selecting experts include at least 5 years’ experience in financial management and cost management in famous construction companies, familiarity with the con- cepts of costing, having high experience or research in the field, the willingness and motivation to interview and study in the field. The selection of individuals was based on non- probability (or judgmental) sampling techniques, purposive, snowballing. In the first interview, they were familiarized with research and domination of people has been evaluated, the subsequent interviews were held two to four times until the best criticisms and suggestions were made and the im- provement of the method has continued.
The statistical population includes 296 financial managers of construction companies with the first grade in professional governmental ranking in Tehran. According to the survey of thirty companies by using targeted and snowball methods, the ratio of companies that using the new accounting meth- ods proposed in the research is 0.98% with a confidence coef- ficient of 90%. The sample size in Cochran method with an error of 0.05 is 26. Sample size consists of 26 financial man- agers of construction projects that have mastered the new concepts of costing and have research or practical experience in the field. With Considering individuals with this feature were limited, the method of their selection was purposeful and then process interview started by qualified individuals and another one was selected by snowball method. At the first interview, the explanation is provided in connection with the research and the collected data is provided to them to ex- press themselves.
The interview tool selected for the cost control constraints analysis due to the differentiation project nature versus the
process nature. The project is unique and has more uncertain- ties that make a changeable environment for management. So, project management has dynamic nature activity based that progress under changing environment. This naturally requires a restricted tool to reach to project goals.
The appropriate technique for analyzing qualitative data under the textual analysis was widely recognized as the con- tent analysis. As Gilham points out, the process of data ana- lysis involves identifying the key words and codes and cat- egorizing them according to the themes, issues, topics, con- cepts, and propositions (Gillham, 2000). In this research, the method of content analysis and cognitive mapping has been used to identify the meaning and concept of the text of the interviews and to show the relationship of words with differ- ent aspects of research. Finally, finding the research should be validated. Case study selected as a research approach for the results validation, because of the project based nature of the construction industry (Toosi et al., 2014).
Therefore, developing a conceptual process based on semi structured interviews with financial managers in the con- struction industry and content analysis and cognitive map- ping has been used to confront cost management constraints in construction projects is a real added value to the scientific literature by this research. Proposed process as a finding of this research verified in a real construction project. Con- sequently, case study just selected as a research approach for reviewing implementation steps of the proposed system. The proposed system implements in a building construction pro- ject with changeable requirements in its tasks to evaluate the system’s ability for increasing competitiveness and traceabil- ity in a project environment.
4. Findings and analysis
In the proposed method, the benefits of activity based cost- ing and the target costing for estimating, budgeting and con- trolling costs are used in accordance with the process of cost
Figure 1 The overall Proposed Process of TC/PFABC-CCS for Construction Costs Control
Analysis of competitors
market research
Identification of Employer Requirements
Determine the target price
Determine the target profit
Calculate the target cost Target price - target profit =
target cost
Calculate direct and overhead costs by the proposed method
work breakdown structure (WBS)
Provide organizational breakdown structure (OBS)
Provide control accounts
Breakdown of target cost into control accounts (Direct cost, site Overhead &
Central office overhead)
Calculate direct and overhead costs for control
accounts
Project definition
Check the gap between the target cost and cost with the proposed
method
Target cost< proposed method Value
Engineering
End of cost estimation
Database
Identify Value Added and Non Value Added activities
Analysis and management of suppliers
optimal options
NO
YES
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 35
Figure 2 The Proposed Process of TC/PFABC-CCS for Estimating Construction Costs
Figure 2. The Proposed Process of TC/PFABC-CCS for Estimating Construction Costs
Identify activities
Planning activities
Identify resources
Direct Resources Indirect resources
(site Overhead cost)
Categorize resources
( Unit , category, project levels )
Categorize resources
( Unit, category, project, Facility
levels)
Calculate indirect costs
Calculate the costs of control accounts
Category and project level
resources,
Resources related to multi-
activity, total project
Activity level resources
(Resources related to an
activity
Calculate direct costs
Such as calculating
the cost of the
category and
project level
Total cost
Indirect resources
(Central office overhead)
Categorize resources
Project , Facility level
Such as calculating the
cost of the category and
project level
Project level
resources
)
Administrative
(
Facilities-level
resources
)Office rental,
cleaning,
water / gas ... ( Source driver
Identification
(Cost factor, such as m²,
kilogram )
Determine the amount
of resources driver
(such as 100kg)
Set the standard rate
(Per resources price)
Calculate direct costs
Activity level
( resource amount
driver * Standard rate
)
Resources driver
Identification
(Cost factor, such as kg )
Determine the amount driver
of resources
Set the standard rate
(Per resources price)
Determine the total cost of each
resource
(amount driver * standard rate)
Determine the driver of each activity
(Such as number, meter, week)
Determine the amount of activity driver
Calculate cost driver rates
(Total cost per resource / Total amount
of driver for activities related to that
resource )
Calculate activity cost goals
(Cost driver Rate * Activity driver
Amount )
management in construction projects. Regarding the intro- duction of the target costing in the literature review, to estim- ate competitive costs, target costing method has been used initially with a top-down view. And then used the improved method of performance focused activity based costing for cost estimation with a bottom-up view to accurately estim- ate all direct and indirect activities.
The overall process of the proposed cost control system based on the performance focused activity based costing, and the target costing (TC/PFABC-CCS) in construction projects is described below. See Figure 1
In order to estimate the direct and overhead costs with high precision and capability, with the ability of activity- driven and cost-driven, the activity based costing method and its new generation required. Then according to the literature
and the planning process in construction project, we utilize the following process by improve the PFABC method in ac- cordance with the planning stages of construction projects. As a result, by creating a matrix derived from planned activ- ities and classified resources, we can estimate and allocate the cost of direct and overhead resources to activities in ac- cordance with the following steps. See Figure 2
Also, after estimating the costs of the project and verifying it based on the overall process of the proposed method, we will budget the costs. At this stage, with using the scheduled activities and estimated costs, they are budgeted for weekly or monthly periods, and direct and overhead costs can be tracked and controlled separately in each period. During the implementation of the project, progress reports will be pre- pared in certain periods. By calculating the progress of the
36 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Figure 3 The Proposed Process of TC/PFABC-CCS for Controlling Construction CostsFigure 4. The Proposed Process of TC/PFABC-CCS for Controlling Construction Costs
Identify the actual resources
of each activity
Identify the actual amount
driver of each activity
Identify the actual rate of
each activity resources
Calculate
expenditures
Calculate the deviation of the rate for each
activity resource
( Actual amount driver* actual Rate - Actual
amount driver * Standard Rate)
Calculation of amount deviation for each
activity resource
( Actual amount driver * Standard rate -
paln amount driver * Standard rate)
Calculate Efficiency for each activity
( Total rate deviation of activity resources + Total
amount deviation of activity resources )
Calculate the effectiveness of each activity
( plan progress * Standard rate * plan amount -
actual progress * Standard rate * plan amount )
Calculate Productivity for each activity
(Efficiency+ Effectiveness)
Update the schedule Calculate the progress of
each activity in the schedule
Calculate Project Cost Deviation
Estimated final cost
of the project
Target cost>final cost
Target costing
Reduce Costs
(Kaizen)
Estimated Final Cost
Calculate Efficiency for each activity
( plan progress * Activity budget -
actual progress * actual activity cost)
YES
NO
activities and the project and calculating the actual resources used, the actual costs of each activity and the cost overrun can be calculated. And we can provide indicators of effi- ciency, performance and productivity for each activity and the whole project. Finally, by calculating the cost of complet- ing the project and comparing it with the target cost, we can calculate the profit and loss of the project. Also, corrective actions can be taken with the help of value engineering and kaizen techniques. See Figure 4 and Figure 3
The content analysis process has continued from the be- ginning of the interviews to access and development of the proposed method. To assess the validity and reliability of the interview questions, Cronbach’s alpha has been used, and the Cronbach’s alpha coefficient is above 0.7, which expresses its reliability. The interview questions include the main topics from the literature review including the target costing, activ- ity based costing, overhead cost management, cost manage- ment and control, which are considered as the main nodes.
Figure 4 The Proposed Process of TC/PFABC-CCS for budgeting Construction Costs
Provide Schedule
Calculate the indirect cost of each week / month
Total direct costs Activity Level
Total activity costs Per week / month
Total direct costs category & project
level
Calculate the direct cost of each week / month
Total overhead costs (site Overhead
cost )
Budgeting costs
Calculate the cost of each week / month ( cost Goal for each activity / duration)
Calculate the cost of each week / month (Total cost per activity / duration)
Calculate the cost of each week / month
(Total cost per activity / duration)
Total overhead costs (Central office
overhead )
Calculate the cost of each week / month ( cost Goal for each activity / duration)
Direct costsIndirect costs (overhead)
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 37
Figure 5 A cognitive mapping of expert interviews and the benefits of the proposed cost control system
Integrated Cost Management System
PFABC & TC
PFABC
cost management and control
overhead costs
Accurate and traceable costing
Available at any stage of the project
An opportunity to reduce overhead costs
manage and control overhead costs
Identify Overhead Costs
Precise estimates of direct and indirect costs
strategic Management
Prioritize price and strategic benefits rather than costs
Perspective on the allowed cost
Use control account) Direct and Overhead Costs (
Analysis of time delays in direct and overhead costs
Removing constraint on project control methods
Analysis of costs and revenues in each reporting
period
comprehensive management and analysis of costs and deviations
Identify and remove activities without value
added
Calculate the deviation of the amount and rate of each
activity
Calculate the efficiency, effectiveness and
Productivity of each activity
Review the project profitability in each reporting period
Integration of accounting system
and project control
Eliminating overhead and direct cost management
constraints
Identify the causes of cost overrun
precise overhead cost
driver and factors creating overhead
costs
Determine the overhead costs
Use the bottom-up and top-down methods
Financial evaluation, performance,
physical progress
Reduce costs at all stages
Identify factors that increase costs and apply corrective
actions
Integration with other costing systems
Target Costing
activity-based Cost management
Identification of driver and cost creation factors
Possibility to combine with different costing methods
Accurate management of 10 to 35 percent of overhead
costs
Based on the questions and keywords related to each cat- egory with the open coding method, the concepts and subsets are extracted and the result 34 concepts and codes has been used to validate the advantages of the proposed method. As a result, due to lack of visual aspects of content analysis, the visual feature of cognitive mapping has been used. 34 Con- cepts and codes resulting from interviews were classified into four categories and classifieds by cognitive mapping method. See Figure 5
Also, to evaluate the competitiveness of the proposed method versus to the traditional method, Friedman’s non- parametric test has been used. And competitiveness level of both methods has been extracted from 26 experts based on the ranking of one to 10. According to the Friedman test, the Chi-square statistics is 26 and the degree of freedom 1 and the coverage level of the statistics is equal to 0.05, which means that there is a significant difference between the level of competitive ability of the proposed method and the tradi- tional method. See Table 1
Table 1 Competitiveness measurement using Friedmanś nonparametric testTable 1. Competitiveness measurement using Friedman's nonparametric test
Maximum Minimum Std.
Deviation Mean N
9 6 0.895 8.19 26 The proposed method
5 1 1.10 2.88 26 Traditional methods
5. Case study
The study project consists of eight parking floors in a com- mercial complex in Tehran, built by the private sector. The project is located in an area of 5000 square meters and has a metal structure. In the studied project, the data are collec- ted through direct observation and project documentation including project specifications, project design, scheduling, cost accounts, progress reports, drawings, documents and photographs. The project scope includes site preparation and implementation of the walls, ceil and ramp of the parking.
Due to the reduction of the calculations and the volume of information provided, only the activity of site preparation and the activities of one floor as a single project has been considered and studied.
In the current project, the price of the project is based on its costs, not on Competitive conditions. The overhead costs, which include an important part of the costs, are considered as a constant percentage. In construction projects, the in- crease in time has a great deal of impact on overhead costs, which is not considered in traditional ways. Also, the physical progress of the project is not related to accounting reports, and their functions are separate, and at different times are calculated and reviewed, and do not help managers in mak- ing decisions at the right time. The physical progress of the project control is different and separate with the latest cost reports, and the cost of the project is calculated based on the categories of resource consumption that are not related to project activities and work packages, and there is no ability
38 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Table 2 Determine the direct costs of activity level
Table 3 Determine the amount of direct resource in batch and project level and the amount of overhead resource
Activity
Overhead Resourse
The Amount of Direct Resourse
The Amount of Overhead Resourse
batch level
project level
Activity level batch level
Wire and spacer
- Safety shoes
Helmet gloves Conex Site
office warehouse
Depreciation of Polywood
Depreciation of metal mold
Depreciation of scaffold
Resourse driver
Kg - pair pair pair M2 M2 M2 10%
(Total,kg ) 10%
(Total,kg ) 10%
(Total,kg ) Amount 20700 Kg - 100 pair 100 pair 200 pair 120 M2 80 M2 60 M2 1700 kg 28000 kg 400 kg Standard Rate($)
$0,76 $13 $1,3 $0,50 $21 $21 $18 $26 $0,46 $0,46
Total resource cost
$15.732 $1.300 $130 $100 $2.520 $1.680 $1.080 $4.420 $1.288 $18,4
Rate of cost driver (Total resource cost/Total
Amount driver) $0,76 - $13 $1,3 $0,5 $21 $21 $18 $3 $0,05 $0,05
Project Duration
(Day) 30 Day 30 Day 20 Day 20 Day 20 Day 20 Day 20 Day 20 Day 30 Day 30 Day 30 Day
Site preparation
20 Day 100 pair 100 pair 200 pair 120 M2 80 M2 60 M2
Floor 16 Day walls 9 Day
Reinforcement 5 Day 3700 Kg formwork 4 Day 14000 Kg concreting 3 Day 14000 Kg
Ceiling 8 Day Scaffolding 4 Day 80 Kg
install Plywood 2 Day 170 Kg 40 Kg Reinforcement 5 Day 17000 Kg 340 Kg 80 Kg
concreting 3 Day 1190 Kg 200 Kg Total resourse
driver 20700 Kg - 100 pair 100 pair 200 pair 120 M2 80 M2 60 M2 1700 Kg 28000 Kg 400 Kg
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 39
Table 4 Continue with the amount of direct resource in batch and project level and the amount of overhead resource
Activity
Overhead Resourse
Amount of Overhead Resourse project level Facility level
Transportation Civil
engineer Surveyor
Project Planner
project manager
Office Supplies
utilities pantry &
consumables
Resourse driver items Person / month
Person / month
Person / month
Person / month
Average Month Month
Amount 25 2 1 1 1 1 1 1 Standard Rate($) $65 $1.315 $789 $526 $1.842 $1.315 $790 $730 Total resource cost $1.625 $2.630 $789 $526 $1.842 $1.315 $790 $730
Rate of cost driver (Total resource cost/ Total Amount driver)
$65 $858 $515 $343 $1.201 $858 $515 $476
Project Duration (Day) 30 Day 30 Day 30 Day 30 Day 30 Day 30 Day 30 Day 30 Day Site preparation 20 Day 8 1/33 0/67 0/67 0/67 0/67 0/67 0/67
floor 16 Day walls 9 Day
Reinforcement 5 Day 3 0/33 0/17 0/17 0/17 0/17 0/17 0/17 formwork 4 Day 3 0/27 0/13 0/13 0/13 0/13 0/13 0/13 concreting 3 Day 1 0/20 0/10 0/10 0/10 0/10 0/10 0/10
Ceiling 8 Day Scaffolding 4 Day 3 0/27 0/13 0/13 0/13 0/13 0/13 0/13
install Plywood 2 Day 2 0/13 0/07 0/07 0/07 0/07 0/07 0/07
Reinforcement 5 Day 4 0/33 0/17 0/17 0/17 0/17 0/17 0/17 concreting 3 Day 1 0/20 0/10 0/10 0/10 0/10 0/10 0/10
Total resourse driver
25 3/07 1/53 1/53 1/53 1/53 1/53 1/53
to track based on time and resource consumption of activity and the impact of time is not considered at the expense of different parts of the work. On the other hand, there is not a system and process based on current conditions of the project and its costs for decisions on cost reduction and maintaining competitiveness.
The project schedule starts on 23rd September 2017 with ending 22nd October 2017. At the beginning of the project, we used target costing (target price - strategic profit = allow- able cost), therefore allowable costs estimated at $392,763. The steps to determine the direct and indirect costs of the proposed method are implemented.
The following steps have been taken to estimate the over- head costs:
1. Identify and categorize project overheads.
2. Identify the resource driver and the amount of them.
3. Determine the standard rate of each resource.
4. Determine the total cost of each resource.
5. Identify activities related to each overhead.
6. Determine the amount of driver for each activity. (the total amount of driver of the resources divides among the activities according to the amount of consumption.). Activities with monthly fixed costs have the following formula, amount of resource driver (duration of activity / total duration of the project).
7. Calculate rate of the cost driver for each activity. (total resource cost/total amount of resource driver)
8. Calculate the cost driver for each activity. (the amount of driver for each activity rate of the cost driver for each activity)
9. Cost objective of each activity (the sum of the cost drivers of each activity related to different resource)
See Tables 2, 3, 4, 5 and 6
As a result, the total direct costs of the activity level amoun- ted to $337,226, and the total direct cost of the batch and pro- ject level was $15,732 and total overhead costs were $24,625. Then budgeting the costs based on schedule.
See Tables 7, 8 and 9
According to the calculations, the total cost of the bottom- up approach was $377,583 with the performance focused activity based costing method. The estimated cost calculated by the target costing method was $392,763. Considering that the costs calculated and estimated by the activity based cost- ing method are less than the allowable costs calculated by the target costing method, it can be the basis for the cost.
To control costs in the cut of date 25, actual costs are com- pared with the plan costs to determine the cost deviation. After updating the schedule and determining the actual costs, the cost of the plan is compared to the actual cost until the end of the 25th day.
At this stage, it is necessary to integrated measuring project progress with cost calculations to help calculate project cost deviations, corrective actions and strategic decisions.
See Tables 10 and 11
As a result, considering the cost details in the tables above, the reasons for the increase in cost are tracked and the de- tails of the amount of resource, the rate and the plan cost and actual trackable costs has been calculated. It can also be used for each activity and resource, such as matrix tables, to calculate the efficiency, effectiveness, and productivity of
40 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Table 5 Determine the cost of direct recourse in batch and project level and The cost of overhead resource
Activity
Overhead Resourse
The Cost of Direct Resourse
The Cost of Overhead Resourse
batch level
project level
Activity level batch level
Wire and spacer
- Safety shoes
Helmet gloves Conex Site
office warehouse
Depreciation of Polywood
Depreciation of metal mold
Depreciation of scaffold
Resourse driver
Kg - pair pair pair M2 M2 M2 10%
(Total,kg ) 10%
(Total,kg ) 10%
(Total,kg ) Amount 20700 Kg - 100 pair 100 pair 200 pair 120 80 60 1700 28000 400 Standard Rate($)
$0,76 $13 $1,3 $0,50 $21 $21 $18 $26 $0,46 $0,46
Total resource cost
$15.732 $1.300 $130 $100 $2.520 $1.680 $1.080 $4.420 $1.288 $18
Rate of cost driver (Total Amount driver/Total
resource cost) $0,76 - $13 $1,3 $0,5 $21 $21 $18 $3 $0,05 $0,05
Project Duration
(Day) 30 Day 30 Day 20 Day 20 Day 20 Day 20 Day 20 Day 20 Day 30 Day 30 Day 30 Day
Site preparation 20 Day $1.300 $130 $100 $2.520 $1.680 $1.080 Floor 16 Day walls 9 Day
Reinforcement 5 Day $2.812 formwork 4 Day $644 concreting 3 Day $644
Ceiling 8 Day Scaffolding 4 Day $4
install Plywood 2 Day $442 $2 Reinforcement 5 Day $12.920 $884 $4
concreting 3 Day $3.094 $9 Total resourse
driver 20.700 - 100 pair 100 pair 200 pair 120 M2 80 M2 60 M2 1700 Kg 28000 Kg 400 Kg
Total resourse cost
$15.732 $0 $1.300 $130 $100 $2.520 $1.680 $1.080 $4.420 $1.288 $18
Table 6 Continue Determine the cost of direct recourse in batch and project level and the cost of overhead resource
Activity
Overhead Resourse
The Cost of Overhead Resource
Total Overhead
cost
Total direct cost. batch & project level
project level Facility level
Transportation Civil
engineer Surveyor
Project Planner
Supervisor project
manager Office
Supplies utilities
Pantry & consumables
Resourse driver
items Person / month
Person / month
Person / month
Person / month
Person / month
Average Month Month
Amount 25 2 1 1 1 1 1 1 1 Standard Rate($)
$65 $1.315 $789 $526 $1.842 $1.842 $1.315 $790 $730
Total resource cost
$1.625 $2.630 $789 $526 $1.842 $1.842 $1.315 $790 $730
Rate of cost driver (Total Amount driver /
Total resource cost) $65 $858 $515 $343 $1.201 $1.201 $858 $515 $476
Project Duration
(Day) 30 30 30 30 30 30 30 30 30
Site preparation 20 Day $520 $1.143 $343 $229 $801 $801 $572 $343 $317 $11.880 $0 Floor 16 Day walls 9 Day
Reinforcement 5 Day $195 $286 $86 $57 $200 $200 $143 $86 $79 $1.332 $2.812 formwork 4 Day $195 $229 $69 $46 $160 $160 $114 $69 $63 $1.749 $0 concreting 3 Day $65 $172 $51 $34 $120 $120 $86 $52 $48 $1.391 $0
Ceiling 8 Day Scaffolding 4 Day $195 $229 $69 $46 $160 $160 $114 $69 $63 $1.109 $0
install Plywood 2 Day $130 $114 $34 $23 $80 $80 $57 $34 $32 $1.029 $0 Reinforcement 5 Day $260 $286 $86 $57 $200 $200 $143 $86 $79 $2.285 $12.920
concreting 3 Day $65 $172 $51 $34 $120 $120 $86 $52 $48 $3.851 $0 Total resourse
driver 25 3,07 1,53 1,53 1,53 1,53 1,53 1,53 1,53 $24.625 $15.732
Total resourse cost
$1.625 $2.630 $789 $526 $1.842 $1.842 $1.315 $790 $730 $40.357
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 41
Table 7 Budgeting the direct costs (activity level)
Project Duration
(Day) Schedule / Calculate the cost of each day
Total direct cost per activity
(Activity level) Floor 16
walls 9 10/7 10/8 10/9 10/10 10/11 10/12 10/13 10/14 10/15 10/16 10/17 10/18 10/19 10/20 10/21 10/22 $81.040
Reinforcement 5 $9.214 $9.214 $9.214 $9.214 $9.214 $46.070
formwork 4 $630 $630 $630 $630 $2.520
concreting 3 $10.817 $10.817 $10.817 $32.450
Ceiling 8 $256.186
Scaffolding 4 $368 $368 $368 $368 $1.470
install Plywood
2 $315 $315 $630
Reinforcement 5 $39.633 $39.633 $39.633 $39.633 $39.633 $198.166
concreting 3 $18.640 $18.640 $18.640 $55.920
Total cost $9.214 $9.214 $9.844 $9.844 $20.661 $11.447 $10.817 $368 $368 $368 $40.316 $39.948 $39.633 $58.273 $58.273 $18.640 $337.226
Table 8 Budgeting the direct costs for batch and project level and overhead costs
Project Duration
(Day)
Total Overhead
cost
Total direct cost. batch & project level
TOTAL 9/23 9/24 9/25 9/26 9/27 9/28 9/29 9/30 10/1 10/2 10/3 10/4 10/5 10/6
Site preparation 20 $11.880 $0 $11.880 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 Floor 16 walls 9
Reinforcement 5 $1.332 $2.812 $4.144 formwork 4 $1.749 $0 $1.749 concreting 3 $1.391 $0 $1.391
Ceiling 8 Scaffolding 4 $1.109 $0 $1.109
install Plywood 2 $1.029 $0 $1.029 Reinforcement 5 $2.285 $12.920 $15.205
concreting 3 $3.851 $0 $3.851 Total $24.625 $15.732 $40.357 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594 $594
Table 9 Continuing budgeting of direct costs for batch and project level and overhead costs
Project Duration
(Day) 10/7 10/8 10/9 10/10 10/11 10/12 10/13 10/14 10/15 10/16 10/17 10/18 10/19 10/20 10/21 10/22 Total
Site preparation 20 $594 $594 $594 $594 $594 $594 $11.880 Floor 16 walls 9
Reinforcement 5 $829 $829 $829 $829 $829 $4.144 formwork 4 $437 $437 $437 $437 $1.749 concreting 3 $464 $464 $464 $1.391
Ceiling 8 Scaffolding 4 $277 $277 $277 $277 $1.109
install Plywood 2 $514 $514 $1.029 Reinforcement 5 $3.041 $3.041 $3.041 $3.041 $3.041 $15.205
concreting 3 $1.284 $1.284 $1.284 $3.851 Total $1.423 $1.423 $1.860 $1.860 $2.324 $1.495 $464 $277 $277 $277 $3.833 $3.555 $3.041 $4.325 $4.325 $1.284 $40.357
42 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Table 10 Actual direct costs until 25th
Actual Cost - Cut of date 25th
Activity
Resourse
Actual Resourcedriver &Amount driver Identification
Calculate of the Actual cost Total Actual
direct cost per
activity
Actual Direct Resources ActualDirect Resources
Activity level Activity level
worker Concrete bar worker Concrete bar
Resourcedriver Number M3 Kg/ton Number M3 Kg/ton
Standard Rate($) $23 $ 39 $0/58 $23 $39 $0/58
Project Actual
Duration (Day)
Plan Progress
Actual Progress
Total Actual
direct cost
Floor 65% 48%
walls 100% 62% $58.495
Reinforcement 3 Day 100% 65% 120 person 50000 Kg $2.760 $29.000 $31.760
formwork 3 Day 100% 60% 110 person $2.530 $2.530
concreting 2 Day 100% 60% 35 person 600 M3 $805 $23.400 $24.205
Ceiling 36% 20% $103.621
Scaffolding 3 Day 75% 40% 50 person $1.150 $1.150
install Plywood 2 Day 50% 40% 20 person $460 $460
Reinforcement 4 Day 20% 40% 32 person 140000 Kg $736 $81.200 $81.936
concreting 2 Day 0% 20% 25 person 500 M3 $575 $19.500 $20.075
Total Resourcedriver
Total 392 person 1100 M3 190000 Kg $9.016 $42.900 $110.200 $162.116
Table 11 Plan direct costs until 25th
Plan Cost - Cut of date 25th
Activity
Resourse
Calculateof the cost
Total direct cost per activity
Direct Resources
Activity level
worker Concrete bar
Resourcedriver Number M3 Kg/ton
Standard Rate($) $21 $37 $1
Project Actual
Duration (Day)
Plan Progress
Actual Progress
direct cost per activity
Floor 65% 48%
walls 100% 62% $81.040
Reinforcement 3 Day 100% 65% $3.150 $42.920 $46.070
formwork 3 Day 100% 60% $2.520 $2.520
concreting 2 Day 100% 60% $630 $31.820 $32.450
Ceiling 36% 20% $41.051
Scaffolding 3 Day 75% 40% $1.103 $1.103
install Plywood 2 Day 50% 40% $315 $315
Reinforcement 4 Day 20% 40% $193 $39.440 $39.633
concreting 2 Day 0% 20% $0 $0 $0
Total Resourcedriver
Total $7.911 $31.820 $82.360 $122.091
each activity. Specifically, for the reinforcement of the walls activity/worker Resource, the following is stated below.
See Table 12 Efficiency means doing activities in the least time and with
minimal resources. The difference between the two values of actual cost and plan cost indicates the deviation. On the other hand, the sum of the Rate variance and the Amount variance is efficiency that are the root and the reasons for the increase in cost. Effectiveness variance also indicates the amount of achievement of predetermined goals. Productivity is also the result of a combination of efficiency and effective- ness deviations.
See Table 13
As a result, total direct cost deviation (activity level) of the plan is equal to $-19,898 due to the increase in standard labor rate, the standard rate of concrete and material waste.
In the following, actual direct costs of the batch and pro- ject level and actual overhead costs up to 25th are calculated. In order to determine the actual overhead costs, it is only ne- cessary to change the amount of actual resource and actual resource rates in the matrices, and also update the schedule and change the time of the resources affected by the time. Also to determine the amount of resource driver for activities that resource driver of them is time, such as project and facil- ity overhead resources, this formula has been used: ((activity duration/total duration of the project) * Amount of resource driver).
And The following formula uses to compute the total cost of the source that resource driver of them is time:
((duration until the cut of the date/duration of resource driver) * Amount of resource driver * Standard Rate ($) = (25/30) *2*$1,315=$2,183 (civil engineer)
See Table 14 and 15
To calculate the direct costs of the batch and project level and overhead costs up to 25th, are obtained by multiplying the plan’s progress of each activity at the plan cost.
See Table 16
Consequently, based on the calculations, the actual direct costs of the batch and project level up to date 25 are $15,732 and the plan costs is $5,396. Actual overhead costs up to date 25 are $23,977 and plan costs are $18,155. As a result, overhead cost and direct cost of batch and project level devi- ations is equal to -$15,544. Causes of cost deviations can be measured and tracked based on efficiency (deviation of the rate, deviation of amount), effectiveness, and productivity.
See Table 17
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 43
Table 12 A summary of performance report for the Reinforcement of the walls activity/worker resource
Table 13 Earned Value of direct costs until 25th
Earned Value - Cut of date 25 th
Activity Resource
Resourcedriver &Amount driver Identification
Calculate of Earned Value cost
Total Earned Value direct cost
per activity
Direct Resources Direct Resources Activity level Activity level
worker Concrete bar worker Concrete bar Resource driver Number M3 Kg/ton Number M3 Kg/ton
Standard Rate($) $23 $39 $1 $23 $39 $1
Project Actual
Duration (Day)
Plan Progress
Actual Progress
Earned Value direct cost
Floor 65% 48% walls 100% 62% $50.928
Reinforcement 3 Day 100% 65% 97/5 person 48100 Kg $2.048 $27.898 $29.946 formwork 3 Day 100% 60% 72 person $1.512 $1.512 concreting 2 Day 100% 60% 18 person 516 M3 $378 $19.092 $19.470
Ceiling 36% 20% $91.290 Scaffolding 3 Day 75% 40% 28 person $588 $588
install Plywood 2 Day 50% 40% 12 person $252 $252 Reinforcement 4 Day 20% 40% 18/4 person 136000 Kg $386 $78.880 $79.266
concreting 2 Day 0% 20% 4 person 300 M3 $84 $11.100 $11.184
Total Resourcedriver Total 250 816 184.100 $5.248 $30.192 $106.778 $142.218
Then, it estimates the total cost of the project. Total cost of project completion is calculated as follows:
Total cost of the project =Actual cost + Estimated remaining costs
As a result, calculating all three categories of costs includ- ing the direct cost of the activity level, batch level and the project level and the overhead cost, the estimated cost of the project is equal to $389,538.
After calculating the total cost of the project, it should be compared with the target cost and the calculated strategic profit, and check the amount of deviation from the allow- able cost. Given the fact that at this stage, it has been faced with increasing costs, but the final cost of the project has not exceeded the planned cost with the target costing and still delivers the desired profit.
However, due to the details of the costs, it was necessary to reduce the costs of materials waste and extend the dura- tion of the project. It is also clear from the calculations that the direct human resources of the project were more than predicted and their costs were higher than the standard rate.
Also, according to the existing conditions, the employer should be required to carry out the project’s pre-requisite activities, such as insulation and installation of the pillar to prevent further project delays, otherwise direct human re- sources should be reduced and at a lower cost. Due to con- crete and other materials waste, management should also have an accurate estimate of the amount of concrete and materials. As a result, with accurate tracking of costs and rooting due to increased costs, comprehensive and accurate information can be provided at the right time for manage- ment decisions.
Using the proposed method in the case study, we were able to integrate physical progress reports with accounting reports at the same time. In the traditional approach, we only looked at the categories of resources and their costs. in proposing method in addition to categorizing resources and calculating the costs of each resource, could be used to calculate and track the resources and costs associated with each activity, and the reason for the increase in costs was evaluated in each area of work and suggested approaches for better manage-
44 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Table 14 Actual direct costs of the batch and project level and actual overhead costs up to 25th
Activity
Overhead Resourse
The Actual Cost of Direct Resourse
The Actual Cost of Overhead Resourse
batch level
project level
Activity level batch level
Wire and spacer
- Safety shoes
Helmet gloves Conex Site
office warehouse
Depreciation of Polywood
Depreciation of metal mold
Depreciation of scaffold
Resourse driver
Kg - pair pair pair M2 M2 M2 10%
(Total,kg ) 10%
(Total,kg ) 10%
(Total,kg ) Amount 20700 Kg - 120 pair 120 pair 230 pair 120 M2 80 M2 60 M2 1700 Kg 28000 Kg 400 Kg Standard Rate($)
$0,76 $15 $2 $0,50 $21 $21 $18 $26 $0,46 $0,46
Total resource cost
$15.732 $1.800 $240 $115 $2.520 $1.680 $1.080 $4.420 $1.288 $18
Rate of cost driver (Total Amount driver/Total
resource cost) $0,76 - $15 $2,0 $0,5 $21 $21 $18 $3 $0,05 $0,05
1 1 1 1 1 1 1 1 1 1 1
Project Duration
(Day) 25 Day 25 Day 20 Day 20 Day 20 Day 20 Day 20 Day 20 Day 25 Day 25 Day 25 Day
Site preparation 20 Day $1.800 $240 $115 $2.520 $1.680 $1.080 Floor 16 Day walls 9 Day
Reinforcement 5 Day $2.812 formwork 4 Day $644 concreting 3 Day $644
Ceiling 8 Day Scaffolding 4 Day $4
install Plywood 2 Day $442 $2 Reinforcement 5 Day $12.920 $884 $4
concreting 3 Day $3.094 $9 Total resourse
driver 20700 Kg - 120 pair 120 pair 230 pair 120 M2 80 M2 60 M2 1700 Kg 28000 Kg 400 Kg
Total resourse cost
$15.732 $0 $1.800 $240 $115 $2.520 $1.680 $1.080 $4.420 $1.288 $18
Table 15 Continuing actual direct costs of the batch and project level and actual overhead costs up to 25th
Activity
Overhead Resourse
TheActual Cost of Overhead Resourse project level Facility level
Transportation Civil
engineer Surveyor
Project Planner
Supervisor project
manager Office
Supplies utilities
Pantry & consumables
Resourse driver
items Person / month
Person / month
Person / month
Person / month
Person / month
Average Month Month
Amount 30 2 1 1 1 1 1 1 1 Standard Rate($) $71
$1,315 $789 $526 $1,842 $1,842 $1,315 $790 $730
Total resource
cost $2,130 $2,183 $655 $437 $1,529 $1,529 $1,091 $656 $606
Rate of cost driver (Total Amount driver/Total
$85 $700 $420 $280 $980 $980 $700 $420 $388
1 0/830 0/830 0/830 0/830 0/830 0/830 0/830 0/830
Project Duration
(Day) 25 25 25 25 25 25 25 25 25
Site preparation 20 $682 $1,119 $336 $224 $784 $784 $560 $336 $311 Floor 16 walls 9
Reinforcement 5 $256 $168 $50 $34 $118 $118 $84 $50 $47 formwork 4 $256 $168 $50 $34 $118 $118 $84 $50 $47 concreting 3 $85 $112 $34 $22 $78 $78 $56 $34 $31
Ceiling 8 Scaffolding 4 $256 $168 $50 $34 $118 $118 $84 $50 $47
install Plywood 2 $170 $112 $34 $22 $78 $78 $56 $34 $31 Reinforcement 5 $341 $224 $67 $45 $157 $157 $112 $67 $62
concreting 3 $85 $112 $34 $22 $78 $78 $56 $34 $31 Total resourse
driver 25 3/12 1/56 1/56 1/56 1/56 1/56 1/56 1/56
Total resourse cost
$2,130 $2,183 $655 $437 $1,529 $1,529 $1,091 $656 $606
H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47 45
Table 16 The Plan and Earned Value Cost overhead cost and direct cost of batch & project level until 25th
The Plan Cost and Earned value until 25th Earned value Progress
Overhead cost
direct cost of batch &
project level
Earned value of
Overhead cost
Earned value of direct cost of batch &
project level Project
Plan Progress
Actual Progress
Site preparation 100% 100% $11.880 $0 $11.880 $0 Floor 65% 48% walls 100% 62% $4.473 $2.812 $2.750 $1.828
Reinforcement 100% 65% $1.332 $2.812 $866 $1.828 formwork 100% 60% $1.749 $0 $1.049 $0 concreting 100% 60% $1.391 $0 $835 $0 Ceiling 36% 20% $1.803 $2.584 $2.539 $5.168
Scaffolding 75% 40% $831 $0 $443 $0 install Plywood 50% 40% $514 $0 $412 $0 Reinforcement 20% 40% $457 $2.584 $914 $5.168
concreting 0% 20% $0 $0 $770 $0
Total $18.155 $5.396 $17.169 $6.996
Total 23.551 24.165
ment and cost reduction and maintaining competitiveness. It also calculates project performance and efficiency, and
at any moment the project can be used to calculate the profit and loss, and the impact of time on the project. It can also calculate remaining work costs based on existing conditions and new prices and volumes of the resource. Finally, the new project costs compared with the competition costs and target costs, if necessary, to reduce costs of corrective action.
As a result of the case study, to confirm the hypothesis 1 and the difference in the proposed method with the tradi- tional method, which categorizes costs only on the basis of resources, it is stated that the importance of linking resources with activities is due to the cause of increased costs and their impact on the cost of each activity and work department. Moreover, the impact of time on costs that was ignored in the traditional way has also been calculated.
In order to confirm the hypothesis 2 and the synergy in applying the two methods, it has been shown that the pro- posed method leads to better management of costs and the possibility of decision making and calculation of competitive prices in line with accurate costing and acts as a cycle. At any moment, it can determine the impact of costs on the final price, measure the amount of profit and loss, and calculate the effectivity and efficiency, and lead to the correct decisions when the proposed method is fully consistent with the project management and control system Are building.
6. Conclusion
Integrated costing system of performance focused activity based costing and the target costing has not been used in pre- vious studies. Because of increase competition in the world, project oriented industries such as the construction industry need utilize more efficient systems especially for cost control. The proposed method in the paper can be used to identify, trace, budget, control, review the conditions of competitors, management decisions, corrective actions, and reporting in a better way and useful manner for managing. This proposed method facilitating according to the construction project pro- cess and the routine of project planning and control process, and it is easily understood for project control experts and project managers. The proposed system reduces the depend- ence of project managers on multiple reports of project con- trol and accounting at different times with different language and knowledge. It has also led to decision-making on profits,
cost reductions and corrective actions and appropriate alloc- ation of costs and resources.
As a result, in this research, important features are provided in relation to the cost control system. Creating a strategic and competitive capability of the cost control system and simultaneously creating up-down view and down-to-top is one of these features. Also, with the allowable cost ceiling, for activities and work packages, it creates alarms to control cost overrun. With the feature of activity-driven direct and overhead costs, it can identify cost overflow segments. And with the target costing, value engineering and kaizen meth- ods, reduces costs continuously.
The proposed method in this research illustrate that the tra- ditional accounting system is not responsive to the project’s accounting system, and it has many problems and deficien- cies therefore our proposed method to answer the problems. The proposed method is proportional to the activities of the construction projects and is in line with the progress reports in the projects and in line with the knowledge and language that can be understood by project managers and relevant ex- perts. In the proposed method, cost reports can reduce costs and optimize their management consistent with the physical progress of the project. One of the difficulties in implement- ing this method is the most accurate and detailed information required and the tracking of cost components that should be traced and collected consistently with the progress of the pro- ject and also require training for relevant specialists.
As a result, with a small amount of time and training to the relevant specialists, reports can be derived from the com- bination of progress reports of work with the cost of all re- sources that is allocated in various activities and work pack- ages, and the amount and price of all work resources are in- cluded, and due to the dynamic nature of the system, you can update the amount of resource or new prices on the system and re-calculate the remaining costs according to the new conditions. Also, considering the competition and environ- mental conditions, the contract price can be determined.
Moreover, during the project, with increasing costs or changes in the price of resources or their amount, you can re- calculate costs in new conditions and compare it with the tar- get price, and profit and loss were recalculated and reviewed, and if necessary, corrective action and new methods can take and reduced costs. Furthermore, based on case study reports, the cause of increased costs (the amount and cost of specific resources) and the related work packages and activities are also determined, and their productivity and efficiency can be calculated. Additionally, by increasing the project time, timely information can be updated in the proposed cost con- trol system, and cost impact and cost of remaining work can be estimated.
7. Recommendations for future research
In this research, we have designed a precise, high certainty, strategic system that can be based on new tools and tech- niques for cost management and building information man- agement (BIM) in future research. In addition to increasing the competitiveness and level of accuracy and cost tracking capability, it can be provided a visual visibility of the pro- ject progression process along with direct and overhead cost management. Through computer simulation. It can also use BIM’s capabilities to examine various designs and construc- tion options by examining the impact of the competitive en- vironment and component costs, along with direct and indir- ect costs over the life of the project.
46 H. Toosi, A. Chamikarpour / Revista de Contabilidad Spanish Accounting Review 24 (1)(2021) 31-47
Table 17 A summary of performance report for the Reinforcement of the walls activity/Wire and spacer Resource
A summary of performance report for the Reinforcement of the walls activity / Wire and spacer Resource plan cost for Wire
and spacer resource Actual cost for Wire and spacer resource
Rate variance Amount variance Effectiveness
variance Productivity
number * rate number * rate Actuaal number
*Plan rate Plan number*
Plan rate 100%*3700*0/76$ -$984
65%*3700*0/76$ 3700*0/76$ 3700*0/76$ 65%*3700*0/76$ 65%*3700*0/76$ -$984
$1.828 $2.812 $2.812 $1.828 -$984
Efficiency +Effectiveness
-$984 - -$984 -$1.968
Deviation of activity efficiency
Deviation of activity efficiency-984/2$
Performance report for Overhead cost/ Reinforcement of the walls activity
Efficiency Effectiveness variance Productivity
$1.332 plan 100%*$1,332 -$58
$924 actual 65%*$1,332 -$466
$866 earned value -$466
Efficiency +Effectiveness
-$58 variance -$524
Funding
This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Conflict of interests
The authors declare no conflict of interests.
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