Flow cost accounting
Flow cost accounting follows material and related system and delivery or disposal costs through an organisation to make losses visible. It distinguishes costs associated with useful output from those linked to negative output such as waste, rather than hiding both within broad overhead. The analysis combines physical flows and monetary values and can support process improvement. Allocation assumptions and the system boundary should be stated clearly.
Worked example
A process has $1,000 material, $200 energy and $300 system cost. If a justified flow analysis assigns 20% to waste, the associated cost is $300 before additional disposal charges.
Common mistake
An estimated allocation is not a measured cash saving. Removing waste creates cash benefit only when resources, purchases or useful capacity actually change.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |