kuliah 4 cost concept

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PENTARIFANKULIAH 4 : COST CONCEPT

G.N. Sandhy [email protected]

022‐70702020081 225 702020

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Agenda

• Cost Concept

• Telecommunication Costing Concept

• Case Study

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Cost Concept

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Cost dan Harga•Biaya adalah seluruh sumber daya yang dikonsumsi untuk menghasilkan produk

•Cost perlu dipertimbangkan dalammenentukan harga, tetapi jangan sampaimenjadi satu‐satunya faktor yang dipertimbangkan dalam menentukan harga

•Ada banyak definisi biaya. Mana yang perludiperhatikan dalam menentukan hargajastel?

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Cost Terminology (1)Cost Terminology (1)

TerminologiTerminologi BiayaBiaya

Allocated Cost Allocated Cost –– atauatau biayabiaya yang yang dialokasikandialokasikan, , merupakanmerupakan biayabiayagabungangabungan (joint cost) (joint cost) atauatau biayabiaya umumumum (common cost) yang (common cost) yang telahtelahdibagidibagi‐‐bagibagi kepadakepada obyekobyek‐‐obyekobyek biayabiaya (cost objects) (cost objects) berdasarkanberdasarkanformula formula tertentutertentu atauatau berdasarkanberdasarkan pertimbanganpertimbangan‐‐pertimbanganpertimbangantertentutertentu..

Average Cost Average Cost –– atauatau biayabiaya ratarata‐‐rata, rata, merupakanmerupakan jumlahjumlah biayabiaya((biasanyabiasanya biayabiaya total) total) dibagidibagi dengandengan kuantitaskuantitas outputnyaoutputnya..

Avoidable Cost Avoidable Cost –– atauatau biayabiaya yang yang dapatdapat dihindaridihindari, , merupakanmerupakan biayabiayayang yang tidaktidak akanakan munculmuncul bilabila suatusuatu alternatifalternatif tidaktidak dilakukandilakukan..

Common Cost Common Cost –– atauatau biayabiaya umumumum, , merupakanmerupakan biayabiaya yang yang timbultimbulmanakalamanakala prosesproses produksiproduksi menghasilkanmenghasilkan lebihlebih daridari satusatu produkproduk atauataujasajasa dimanadimana biayabiaya iniini digunakandigunakan untukuntuk kepentingankepentingan semuasemuaproduk/jasaproduk/jasa..

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Direct Cost Direct Cost –– atauatau biayabiaya langsunglangsung, , merupakanmerupakan biayabiaya yang yang secara secara langsunglangsung bisabisa ditelusuriditelusuri terhadapterhadap obyekobyek biayanyabiayanya. . BiayaBiaya langsunglangsung tidaktidak membutuhkanmembutuhkan alokasialokasi biayabiaya..

Fixed Cost Fixed Cost –– atauatau biayabiaya tetaptetap, , merupakanmerupakan biayabiaya yang yang tidaktidakberubahberubah seiringseiring dengandengan perubahanperubahan volume volume penjualan/produksipenjualan/produksi..

Sunk cost. Sunk cost. AtauAtau biayabiaya terbenamterbenam, , merupakanmerupakan biayabiaya yang yang telahtelahdikeluarkandikeluarkan akanakan tetapitetapi sudahsudah tidaktidak bisabisa laagilaagi digunakandigunakanuntukuntuk menghasilkanmenghasilkan pendapatanpendapatan. .

Incremental Cost Incremental Cost –– atauatau biayabiaya tambahantambahan, , merupakanmerupakantambahantambahan biayabiaya yang yang timbultimbul sebagaisebagai akibatakibat daridari adanyaadanyapeningkatanpeningkatan produksiproduksi atauatau penjualanpenjualan atauatau aktifitasaktifitas strategisstrategislainnyalainnya. .

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Joint Cost Joint Cost –– atauatau biayabiaya gabungangabungan, , merupakanmerupakan akumulasiakumulasi biayabiaya daridarisatusatu atauatau serangkaianserangkaian prosesproses produksi/jasaproduksi/jasa sebelumsebelum diprosesdiproses lebihlebihlanjutlanjut menjadimenjadi produk/jasaproduk/jasa yang yang berbedaberbeda..

Long Run Long Run –– suatusuatu periodeperiode dalamdalam halhal manamana seluruhseluruh factorfactor‐‐faktorfaktorproduksiproduksi, , termasuktermasuk modal modal bersifatbersifat variable. variable. DalamDalam prakteknyaprakteknyajangkajangka waktuwaktu 1010‐‐15 15 tahuntahun digunakandigunakan oleholeh regulator regulator untukuntuk analisisanalisisLRIC.LRIC.

Long Run Incremental Cost (LRIC) Long Run Incremental Cost (LRIC) –– atauatau tambahantambahan biayabiaya dalamdalamjangkajangka panjangpanjang, , merupakanmerupakan biayabiaya tambahantambahan yang yang timbultimbul dalamdalamjangkajangka panjangpanjang (10(10‐‐15 15 tahuntahun) ) akibatakibat penambahanpenambahan volume volume produksiproduksi. . LRIC LRIC umumnyaumumnya dihitungdihitung dengandengan menggunakanmenggunakan teknologi teknologi saatsaat iniini dandanstandarstandar kinerjakinerja terbaikterbaik saatsaat iniini. .

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Marginal Cost Marginal Cost –– atauatau biayabiaya marginal, marginal, merupakanmerupakan perubahanperubahan dalamdalam total total biayabiaya akibatakibat adanyaadanya perubahanperubahan kecilkecil daridari volume volume produksiproduksi..

MarkMark‐‐Up Up –– merupakanmerupakan suatusuatu angkaangka dalamdalam persentasepersentase atauatau jumlahjumlah satuansatuanmonetermoneter tertentutertentu yang yang digunakandigunakan untukuntuk memasukkanmemasukkan biayabiaya gabungangabungan (joint (joint costs) costs) dandan biayabiaya umumumum (common costs). (common costs). BiasanyaBiasanya dilakukandilakukan sebagaisebagaikompensasikompensasi karenakarena biayabiaya gabungangabungan (joint costs) (joint costs) dandan biayabiaya umumumum (common (common costs) costs) tidaktidak dimasukandimasukan dalamdalam perhitunganperhitungan sebelumnyasebelumnya..

StandStand‐‐alone Cost alone Cost –– atauatau biayabiaya yang yang berdiriberdiri sendirisendiri, , merupakanmerupakan biayabiaya total total untukuntuk untukuntuk menghasilkanmenghasilkan produk/jasaproduk/jasa tertentutertentu dalamdalam prosesproses produksiproduksi yang yang dilakukandilakukan secara secara terpisahterpisah..

Total Cost Total Cost –– atauatau biayabiaya total, total, jumlahjumlah keseluruhankeseluruhan daridari biayabiaya‐‐biayabiaya yang yang timbultimbul dalamdalam memproduksimemproduksi sejumlahsejumlah volume. volume. JumlahJumlah biayabiaya tetaptetap (fixed cost) (fixed cost) dengandengan biayabiaya variable (variable cost) variable (variable cost) jugajuga samasama dengandengan biayabiaya total.total.

Variable Cost Variable Cost –– atauatau biayabiaya variable, variable, merupakanmerupakan biayabiaya yang yang berubahberubah seiringseiringdengandengan peningkatanpeningkatan volume volume produksiproduksi..

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COSTING PERSPECTIVECOSTING PERSPECTIVE

Accounting CostAccounting Cost

Engineering CostEngineering Cost

Economic CostEconomic Cost

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Accounting CostAccounting Cost

PerspektifPerspektif iniini fokusfokus terhadapterhadap pencatatanpencatatan atasatas biayabiaya‐‐biayabiayaaktualaktual operator yang operator yang telahtelah timbultimbul..

FokusFokus terhadapterhadap biayabiaya‐‐biayabiaya historishistoris sehinggasehingga bersifatbersifatbackwardbackward‐‐looking. looking.

SumberSumber data data termasuktermasuk laporanlaporan akuntansiakuntansi keuangankeuanganperusahaanperusahaan dandan pengukuranpengukuran‐‐pengukuranpengukuran dalamdalamakuntansiakuntansi manajemenmanajemen yang yang lebihlebih rincirinci

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Engineering CostEngineering Cost

PerspektifPerspektif iniini lebihlebih menekankanmenekankan padapada keputusankeputusan‐‐keputusankeputusan manajemenmanajemen yang yang bersifatbersifat forwardforward‐‐looking. looking.

AnalisisAnalisis BiayaBiaya teknikteknik dihitungdihitung dengandengan berbagaiberbagai caracara untukuntukmendapatkanmendapatkan sasaransasaran tertentutertentu, , sepertiseperti provisioning provisioning daridarijumlahjumlah kapasitaskapasitas tertentutertentu..

TujuanTujuan daridari biayabiaya teknikteknik adalah secara adalah secara umumumum untukuntukmenentukanmenentukan metodametoda yang optimal yang optimal dalamdalam membangunmembangunsuatusuatu fasilitasfasilitas telekomunikasitelekomunikasi

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Economic CostEconomic Cost

TujuanTujuan daridari perspektifperspektif iniini adalah adalah untukuntuk menentukanmenentukanstrukturstruktur hargaharga‐‐hargaharga yang yang efisienefisien yaituyaitu hargaharga‐‐hargaharga yang yang dapatdapat memaksimasimemaksimasi surplus surplus daridari konsumenkonsumen dandan produsenprodusen..

BiayaBiaya ekonomiekonomi menggunakanmenggunakan pendekatanpendekatan forwardforward‐‐looking yang looking yang menekankanmenekankan konsepkonsep variabilitasvariabilitas hargaharga (cost (cost variability), variability), biayabiaya‐‐biayabiaya tambahantambahan (incremental costs) (incremental costs) dandan biayabiaya‐‐biayabiaya peluangpeluang (opportunity costs).(opportunity costs).

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COSTING METHODOLOGYCOSTING METHODOLOGY

Which interconnectpricing standard?

Return oncapital

employed?

Fully allocatedcosts?

Incrementalcosts? Mark-up+

Ramseypricing?

Constrainedmark-up?

Equalmark-up?

Efficientcomponentpricing rule?

Historic? Forwardlooking? Historic?

Actual bestpractice?

Theoreticalbest practice?

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COSTING METHODOLOGYCOSTING METHODOLOGY

Cost Allocation Approach

TopTop‐‐DownDown

BottomBottom‐‐UpUp

Read AcrossRead Across

Cost Allocation Base

Historical Cost Accounting (HCA)Historical Cost Accounting (HCA)

Current Cost Accounting (CCA)Current Cost Accounting (CCA)

Forward Looking Cost Accounting (FLC)Forward Looking Cost Accounting (FLC)

Cost Allocation Procedure

Fully Distributed/Allocated Costs (FDC/FAC)Fully Distributed/Allocated Costs (FDC/FAC)

Embedded Direct Costs (EDC)Embedded Direct Costs (EDC)

Stand Alone Costs (SAC)Stand Alone Costs (SAC)

Marginal Costs (MC)Marginal Costs (MC)

Incremental Costs (IC)Incremental Costs (IC)

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Common Cost danIncremental Cost

Corporate Common Cost

Group A&BCommon Cost

Group C&DCommon Cost

TIC A TIC B TIC C TIC D

Revenue A Revenue B Revenue C Revenue D

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Long Run Incremental Cost (LRIC)

• Untuk keperluan regulasi, maka yang dihitungadalah long run incremental cost

• Short run : suatu jangka waktu di mana biayatertentu akan tetap, dalam artian tidak bisadihindari meski pada saat produksi dihentikan

• Long run : suatu jangka waktu di mana semua biayadapat diperlakukan sebagai biaya variabel

• Penggunaan long run dalam LRIC berarti biaya yang dianalisis mencakup biaya tetap dan biaya variabeldari produk

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Beberapa pendekatan

• Untuk keperluan praktis, ada beberapa pendekatanyang dikembangkan oleh badan‐badan regulasitelekomunikasi di berbagai negara :– European Commission : Long Run Average Incremental Cost (LRAIC)

– US : Total Element Long Run Incremental Cost (TELRIC)

– Australia : Total Service Long Run Incremental Cost (TSLRIC)

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TSLRIC• Ada dua produk, A dan B• Untuk memproduksi kedua produk tersebut dibutuhkan 3 elemen jaringan, yaitu X, Y dan Z, dengan biaya masing‐masing elemen Cx, Cy dan Cz.

• X dibutuhkan oleh kedua jasa (common cost). Tidak adapengurangan biaya jika salah satu produk dihentikan

• Y adalah switch yang digunakan bersama oleh A dan B, tetapi kapasitas Y tergantung pada trafik yang lewat. Jikasalah satu produk dihentikan, biaya Y berkurang 1/3

• Z hanya digunakan oleh B

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TSLRIC (2)• LRIC dari suatu jasa adalah perbedaan dari total cost yang terjadi ketika perusahaan memproduksisemua produk (termasuk jasa yang dianalisis) dengan total cost yang terjadi ketika perusahaanmenset output dari produk yang dianalisis sebesarnol, dengan catatan output dari semua produk lain tetap

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TSLRIC A = 1/3 Cy

• Jika memproduksi A danB

A B

• Jika memproduksi B saja(produk A tidak ada)

B

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Cx

Cy

Cz

Cx

2/3 Cy

Cz

1/3 Cy

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TSLRIC B = 1/3 Cy + Cz

• Jika memproduksi A danB

A B

• Jika memproduksi A saja(produk B tidak ada)

A

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Cx

Cy

Cz

Cx

2/3 Cy 1/3Cy

Cz

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TSLRIC (3)

• Berdasar definisi pada TSLRIC (2), untuk contohyang dibahas, maka :

LRICA = [Cx + Cy+ Cz] – [Cx + 2/3 Cy + Cz ] = 1/3 Cy

LRICB = [Cx + Cy+ Cz] – [Cx + 2/3 Cy] = 1/3 Cy + Cz

Common cost = [Cx + Cy+ Cz] – [LRICA + LRICB] = Cx + 1/3 Cy

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Common Cost• Jika harga semua produk sama dengan LRIC, makaperusahaan rugi karena common cost belumtercover.

• Biaya bersama perlu dialokasikan ke produk‐produkyang ada, maka ada mark up

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Alokasi Common Cost• Umumnya alokasi common cost dilakukanberdasarkan minutes of use

• Misalnya proporsi common cost yang dialokasikanke jasa B adalah s dan A adalah 1‐ S, makaTSLRIC+B = LRICB + s. CC, di mana CC adalah common cost

TSLRIC+B = s Cx + (1+s)1/3 Cy + Cz

TSLRIC+A = (1‐s) Cx + (2‐s) 1/3 Cy

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TELRIC• Pendekatan TELRIC memodifikasi pendekatan TSLRIC untuk diaplikasikan ke elemen jaringan secara individual

• Jadi jaringan untuk menyediakan layanan dibagi ataselemen‐elemen jaringannya, dan kemudian dihitungbiaya untuk setiap elemen

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TELRIC (2)• Menggunakan contoh yang sama dengan contohkasus di TSLRIC, elemen X digunakan bersama olehproduk A dan B, maka biaya elemen X atau Cxdialokasikan ke A dan B

• Jika proporsi yang dialokasikan ke B adalah s danyang dialokasikan ke A adalah (1‐s)TELRICB = s Cx + s Cy + CzTELRICA = (1‐s)Cx + (1‐s) Cy

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Forward Looking Cost• Untuk keperluan regulasi, estimasi biaya biasanyadibuat berdasarkan biaya dari the best technology currently available

• Jika ada dua teknologi. Teknologi kedua adalahteknologi terbaik yang tersedia saat ini denganbiaya lebih rendah dibanding teknologi pertama. Maka LRIC akan dihitung berdasar teknologi kedua

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Telecommunication Costing Concept

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TLC Market Evolution and Costing Requests• Monopoly

– Few attention on services & business costs information

– Technology‐driven choices

– Focus and control on resource allocation efficiency

• Regulated Market– Cost control in order to cope with Authority requests in term

of pricing for liberalized services.

– Authority defines: • what to liberalize (services, network elements)

• which price to fix

• how to define the price (cost methodologies, proxies…)

• Open Market (Full Competition)– Costs are key in order to:

• Perform a correct positioning on the market (price floor)

• Support the Decision making

Incr

easi

ng In

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st fo

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gic

posi

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New roles for cost accounting

• FROM…

– Budget check

– Resource allocation Control

• …TO

– Strategic Analysis

– Profitability Analysis

– Investment Management

From “Cost Knowledge” to “Cost Understanding”

Incr

easi

ng In

tere

st fo

r st

rate

gic

posi

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ng a

nd p

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Current Cost Knowledge needs for TLC Operators

Profitability analysis related to Service, Business Unit and

Company as a whole

Area:Control

Costs and Revenues forecast in case of

different demand and offer scenarios

Area:StrategicPlanning

Cost information requirements from

National Regulatory Authority

Area:Regulatory

Affairs

TLCOPERTLC

OPER

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Cost Knowledge needs for TLC Operators

Profitability analysis related to Service, Business Unit and

Company as a whole

Costs and Revenues forecast in case of

different demand and offer scenarios

Cost information requirements from

National Regulatory Authority

Target: define actions in order to modify cost structure

Target: define correct strategy and market positioning

Target: present evaluation for cost and services

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-To understand cost analysis in a single moment (static picture)...

... Fully Distributed Cost

-To catch cost dynamic and to relate with demand evolution...

... Long Run Incremental Cost

… Responsibilities (Cost) centers

-to perform budget control and forecast projection...

New cost needs vs. new methodologies

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Fully Distributed Cost Methodology

• Total amount of costs is allocated upon Operator services

• It pictures the accounting situation in a specific moment

• It allows to find answers to the following questions:– Which is the actual cost of a specific service?

– Which are the costs due to specific elements or functionalities?

• It does NOT allow:– To highlight cost / volume relationships

– To perform efficiency analysis

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Fully Distributed Costs approach – costs flow

Network & ABC modelsNetwork & ABC models

Account infoAccount info(SAP)(SAP)

Service Service modelsmodels

%1 %2 %3

Investments & Investments & CostsCosts

SERVICES & BUSERVICES & BUCOSTSCOSTS

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Fully Distributed Costs approach –profitability flow

Network & ABC modelsNetwork & ABC models

Account infoAccount info(SAP)(SAP)


%1 %2 %3

Investments, Investments, Costs & RevenuesCosts & Revenues

SERVICES & BUSERVICES & BUPROFITABILITYPROFITABILITY

CostsCosts

RevenuesRevenues

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Long Run Incremental Cost Methodology

• Costs due to incremental volumes of demand are allocated on services

• It allows to highlight a functional link among:– Demand

– Resources (Plants and Operations)

– Values (Investments and Costs)

• It estimates new entrant operators costs

• An efficient cost structure can be defined

• Two types of LRIC methodologies are applied:– Top – Down

– Bottom – Up

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Long Run Incremental Costs approach –BOTTOM UP

•• Forecasted Forecasted Service DemandService Demand

•• New technologies New technologies and servicesand services

Network models Network models and dimensioningand dimensioning Investments & Investments &

Costs EvaluationCosts Evaluation

%1 %2 %3


SERVICESERVICECOST COST TRENDTREND

Equipments and Equipments and other resourcesother resources

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Long Run Incremental Costs approach –TOP DOWN

OPERATOROPERATORASSETSASSETS

CURRENT CURRENT COSTCOST

Investments & Investments & Costs EvaluationCosts Evaluation

%1 %2 %3


SERVICESERVICECOST COST TRENDTREND

Network Network modelsmodels

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Methodologies RelationshipsREGULATION INTERCONN. USO ADC

MARKETCosts

REALCosts

TARGETCosts

RegulatoryAccounts

Strategic

Positioning

Operative Actions

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FDC / LRIC comparison

PRESENTCOSTS

TARGETCOSTS

DECISIONS:ROOM OF MANOUVRE

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FOCUS: Strategic Planning and Investment Management

• Incremental Costs Provide cost information to support strategic planning in order to decide network and offer evolution

• Nowadays challenge: maximize operator profitability, through the definition of “BEST MIX” among:– SERVICE DEMAND

– PRODUCTIVE CAPACITY

– SERVICES PRICE

• NOT BEST TECHNOLOGY (too expensive)

• NOT LOWER PRICES (low revenues)

• YESMAX PROFITABILITY

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Strategic Planning Lever

DEMAND

EVOLUTION

PLANSTRATEGIC

PLANNER

STRATEGIC

PLANNER

PRICE

INCOMES

LRIC COST

PROFITABILITY

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Strategic Planning Lever – COST / QUANTITY RELATIONSHIP

• Strategic Planner can choose the best technology because he knows the COST QUANTITY relationship for every scenario

D0 D1

Scenario A

Scenario B

demand

cost

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Strategic Planning Lever – PRICE

• Strategic Planner can act on specific services price to maximize the use of the current technological mix.

• The demand resilience (elasticity) for each service should be known.

Service 1

Service 2

Service 3

demand

price

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Case Study: Telecom Italia

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COSTING METHODOLOGIES IN TELECOM ITALIA (1/2)

• Telecom Italia, by 1995, has been using cost accounting systems and methodologies in order to cover all three areas defined above:

– Control Area an extended Cost Accounting system, firstly operated in Network Division area and extended to whole Telecom Italia, has been implemented using FDC methodology. Currently it is managed in Administration and Control Area and produces, on a monthly basis, information on costs and revenues on each different Telecom Italia service. It allows specific analysis. It is up‐to‐date to all network and offer evolutions, and includes NGN network and offers.

– Strategic Planning Area based on Cost Accounting results, some specific incremental analysis are performed in order to identifypossible cost and revenues evolutions and BEST MIX identification

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COSTING METHODOLOGIES IN TELECOM ITALIA (2/2)

• Telecom Italia, by 1995, has been using cost accounting systems and methodologies in order to cover all three areas defined above:

– Regulatory Area this area implemented a specific costs accounting system tailored on National Regulatory indications, and in line with European Community definition of “relevant markets”.

• Relevant markets market segments in which it is possible to differentiate TLC competition (defined by EU Commission in order to identify dominant position) European NRA are called to monitor the single market in each country (see next slide)

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RELEVANT MARKETS• Wholesale Markets:

– Markets 8, 9, 10: “Origination, termination, transit for calls in fixed PSTN”

– Market 11: “Wholesale Unbundled access for broadband and voice services”

– Market 12: “ Wholesale Broadband access”

– Market 13, 14: “Termination for leased lines”

• Retail Markets– Market 1, 2: “Retail access to fixed for residential and no residential

market”

– Market 3, 5: “Local, National and Fixed‐Mobile services, available to retail customers on PTSN fixed network for residential and no residential”

– Market 4 ,6: “International services, available to retail customers on PTSN fixed network for residential and no residential

– Market 7: “Retail leased lines”

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COST ACCOUNTING in TELECOM ITALIA – FDC SYSTEM

• The FDC Cost Accounting system has the goal to guarantee the allocation of all costs (sustaind by Telecom Italia) and revenues (obtained in Telecom Italia) for a specific period of time, on the services provided to customers (both final customers or wholesale)

• The system is directly connected with:

– General Ledger / SAP accounting system, in order to obtain costs and revenues information

– Technical and commercial data base (traffic, number of lines,…) in order to obtain the information required to correctly perform the allocation process

• The system produces report at different level and allows to perform specific detailed analysis, on demand.

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FDC SYSTEM ‐ ALLOCATION PROCESS

1) List of services

2) List of resources, equipments (both technical and operative)

3) Definition of resources / equipments used by each service (productive process definition)

4) Definition of information required to allocate resources and equipment on services (“driver”)

5) Feeding with accounting information

6) Report production and output analysis

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1) LIST OF SERVICE• The definition on the list of services is key in order to obtain

correct profitability analysis. The list depends on many elements:– Use of cost accounting output (internal vs. regulatory)

– Level of detail (national vs. local)

– Cost focus (equipment vs. operating process)

– Inter‐company relationships (business unit vs. holding)

Service Layer / Business Unit Layer

SERVICE LAYERSERV 01 SERV 02 SERV 03

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2) LIST OF EQUIPMENT• The system requires the definition of all the equipments

involved in service production process

• Equipment can be grouped in “layer” according to logical / physical network hierarchy (i.e. transmission layer, switching layer, access layer, data layer…)

LAYER 1

LAYER 2 LAYER 3

C.C.11 C.C.12 C.C.13 C.C.14

C.C.21 C.C.22 C.C.31 C.C.32

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3) PRODUCTIVE PROCESS• Each service is provided using different types of resources:

– Dedicated (or “Reserved” for a single service or a homogenous class of service) i.e. DSLAM…

– Shared among different class of services i.e. Transmission Backbone

• For this reason, resources and equipment, used in Telecom Italia, can be divided into dedicated / shared / support (OSS…)

• The productive process of a service allows to identify the relationship among the elements of the different platforms, involved in order to provide each single service (“how and when each equipment is involved”)

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LAYER 1

LAYER 2 LAYER 3

SERVICE LAYER

C.C.11 C.C.12 C.C.13 C.C.14

C.C.21 C.C.22 C.C.31 C.C.32

SERV 01 SERV 02 SERV 03


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4) “DRIVER”• Allocation DRIVER is an index (%) used in order to share the use of a

specific resource or equipment on different other equipments / resources or services

• These indexes can be calculated on the basis of technical information provided by different internal systems

– Traffic analysis

– Bandwidth usage

– Number of customers

– …

• Additionally, the index for operative process, can be calculated through Activity Bases Costing analysis

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LAYER 1

LAYER 2 LAYER 3

SERVICE LAYER

C.C.11 C.C.12 C.C.13 C.C.14

C.C.21 C.C.22 C.C.31 C.C.32


DRIVER 1 DRIVER 2

DRIVER 3 DRIVER 4 DRIVER 5

TECHNICALDATA

OPERATIONALDATA


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5) ACCOUNTING INFORMATION• The allocation process is activated when costs and

revenues information are inserted in the systems.

• These information are provided by SAP modules.

• Revenues allocation is simpler than costs, because, in most cases, revenues can be directly allocated on service, without allocation process analysis

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C O

S T F L O W

LAYER 1

LAYER 2 LAYER 3

SERVICE LAYER

C.C.11 C.C.12 C.C.13 C.C.14

C.C.21 C.C.22 C.C.31 C.C.32


DRIVER 1 DRIVER 2

DRIVER 3 DRIVER 4 DRIVER 5

COSTSINFO

TECHNICALDATA

OPERATIONALDATA


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REPORTING MODULE• Cost of each service• Cost component value• Profit contribute per service• Benchmarking utilities

Cost allocation on Plant cost centre

(progressive allocation module)

Overhead cost allocation

COST ALLOCATION MODULE

Operative and overhead cost

allocation(ABC module)

CO

STS

REV

ENU

ES

Operative & TechnicaldataDriver

TELECOM ITALIA SERVICES

SAP info


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FDC SYSTEM ‐ ALLOCATION PROCESS 6) OUTPUT ANALYSIS• According to the level of detail included in the system (both in term of

service and equipment) it is possible to obtain different output analysis.

ACTUAL PROFITABILITYFOR SERVICE & BU

GEOGRAPHICAL &INTERCONNECT. ANALYSIS

EQUIPMENT & INVESTMENT TRENDS FOR OLD & NEW SERVICES

ECONOMIC PERFORMANCE &VALUE CREATIONANALYSIS

TYPE OF CUSTOMER &TARIFF PLAN ANALYSIS

TECHNICAL COSTCOMPOSITION

TYPE OF COSTANALYSIS(DepreciationPersonnel Costs,..)

PROFIT & LOSSANALYSIS

62

490

68

69

857

5,109

16

79

807

877

11,236

0 2,000 4,000 6,000 8,000 10,000 12,000

CustomerCare

Voice Mail Box

SMS

Intern'l Traffic

NationalTraffic

Costs Revenues

• Total & Per Unit Costs & Revenues• Income Statement for the different services provided.

• Total costs & revenues and the Income statement can also be provided for Business Unit

Margin.: +6.126 Per Minut Cost: 36,5

Margin.: +20 Per Minut Cost: 79

Margin.: +738Per Message Cost: 2,3

Margin.: 11Per Minut Cost: 55

Margin.: -473Per Minut Cost: 1327

ACTUAL PROFITABILITYFOR SERVICE & BU

FDC SYSTEM – OUTPUT ANALYSISSE

RVI

CES

(sample data – for presentation purpose only)

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• Costs can be divided into different categories (Depreciation, Personnel costs,...)

• This analysis can be performed both in absolute or relative values.

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Customer Care

Voice Mail Box

SMS

Intern'l Traffic

National Traffic

Depreciation Personnel IndustrialCommercial General Managment FeeIntern'l cost

TYPE OF COSTANALYSIS(DepreciationPersonnel Costs,..)


RVI

CES


64

0 10 20 30 40 50

Mob.-Intn'lCalls

Mob.-Fix Calls

On-Net Calls

Access SwitchingInter MSC Link Interconnection FeeInterconn. Link

• To assess the impact, in terms of costs, due to the different technical components involved in the productive process.

TECHNICAL COSTCOMPOSITION


RVI

CES


65

GEOGRAPICAL &INTERCONNECT. ANALYSIS

• Special care on geographical distribution of the services on the Operators territory.

• All the interconnection relationships with other fixed and mobile carriers are also taken into account.

MSC AREA N. 01

MSC AREA N. 02

MSCs AREA Met. 01

Average cost: 36.7 Peak: 39.0 Off/Peak: 29.9

Pk 50.1O-Pk 36.4

Pk 30O/Pk 23

Pk 64.2O-Pk 46.6

METROPOLITAN Area

FDC SYSTEM – OUTPUT ANALYSIS


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TYPE OF CUSTOMER &TARIFF PLAN ANALYSIS

2,165

83,112

11,271

2,057

49,498

5,935

0 20,000 40,000 60,000 80,000 100,000

Other

PrePaid

PostPaid6% 16

%

78%PostPaid PrePaidOther

Minutes

• To analyse the profitability for the different customers type. Tariff Plan analysis are also possible, in case detailed information on billing are available.



67

• To analyze the Economic Value Added (EVA) per service: this allows to evaluate how a single service contributes to create value for the Operator.

EVAService 1

+

-low high

EVAService 3

EVAService 2

VolumesVolumes

Unitary revenuesUnitary revenues

OPEXOPEX

TaxTax

ROIROI

WACCWACC

Net CapitalNet Capital

E V AE V A

VALUECHART

CapitalNetEVA

CapitalNet

( ) CapitalNet *WACCROIEVA −=

ECONOMIC PERFORMANCE &VALUE CREATIONANALYSIS



68

• To produces Profit & Loss Analysis at Service & Business Unit level.

• Different types of costs / revenues and types of margins can be provided, according to the accounting structure of the Operator

PROFIT & LOSSANALYSIS

Business Unitnum.1

Service Revenues 100Other Revenues 30

Total Revenues 130Industrial Costs 40Commercial Costs 20Other Operative Costs 20

Total Operative Costs 80E.B.I.T.D.A. 50

Amortizacion 10Depreciation 30

E.B.I.T. 10Financial Costs 5

NET PROFIT / LOSS 5



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NGN Costing

• NGN is part of Telecom Italia Cost Accounting system, being:– a group of services, provided both to Wholesale and Final Customers

(Alice, IPTV…)

– a group of resources and equipment required to provided these services, and modeled according to the same process and approachdescribed above

• According to Cost Accounting methodology: NO DIFFERENCE IN COSTING APPROACH IS APPLIED FOR NGN SERVICES AND EQUIPMENTS IN TELECOM ITALIA

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Reference

• Farda Hasun,One Day Tutorial ICTel 2008, Bottom Up LRIC, IT Telkom

• Stefano LIsa, Defining Costing Model and Value Based Pricing for NGN Platform Framework, Telecom Italia

• PT. Telekomunikasi Indonesia, Diktat RegulasiHarga/Tarif dan Interkoneksi

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G.N. Sandhy [email protected]

022‐70702020081 225 702020

kuliah 4 cost concept

Documents

sandhywidyasthana

dan biaya

tariff plan

serv 03service

depreciation

business unit

technical

common cost