 |
 |
|
Publications
Articles
Cost Control Concepts: The ABCs of Cost Accounting After all the fads in managing and initiating change, there’s a fad just for the cost accountants: Activity-based Costing, or ABC for acronymophiles (no, don’t look it up, it’s not there yet). This new idea expands on the well established, and well founded, idea that associating actual costs with the things your company does will help you decide whether to keep doing them or not. Carrying that idea to its extreme, all costs are painstakingly associated with the activities that produced the cost, not by blind allocation but by careful analysis of exactly what effort is expended and how much it costs. Inc. Technology magazine reports examples of companies that were amazed at how wrong they were about product line profitability after associating actual costs of administrative support activities. As you may have guessed by now, the effort to shift to this technique is both expensive and time-consuming. Software, installation and training runs about $10,000, says Inc., before analysis and implementation, which could easily triple the total cost of the transition. If you have annual sales volume in excess of $20 million and high ratios of indirect/overhead costs to sales, you should probably get some guidance on the feasibility of such a change, but don’t expect any easy answers. This is sort of like reengineering – the cure may at first feel worse than the disease.
To subscribe newsletter, please click here. |
