What is Grenzplankostenrechnung?

[amandeep kathuria]

What is Grenzplankostenrechnung?

[amandeep kathuria]

Grenzplankostenrechnung (GPK) is a German costing methodology, developed after World War II by H.G. Plaut. It was designed to correct errors made by the allocation of fixed cost to the product. Their vision was to provide clear and reliable cost information to managers to help in making better decisions. The term Grenzplankostenrechnung, often referred to as GPK, has been translated as either Marginal Planned Cost Accounting or Flexible Analytic Cost Planning and Accounting.

Foundational Principles of GPK

1) The view of resources and capacity.
2) A quantity based model.
3) The nature of costs: initial and changing.

Objectives

1) Supporting management decision making.
2) How to price product and services
3) How to plan and control operations.

Advantages

1) Comprehensive Approach.
2) Different approach regarding cost drivers.
3) Detailed approach to cost control.
4) Willing to make e estimates.
5) Better use of different costs for different purpose.

Disadvantages

1) System support and expertise required in cost management.
2) Too much information is not healthy sometimes.
3) Cost of implementing is high.
4) Small companies do not require such complex system.

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