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How A Cost Accounting System Improved Efficiency And Profit

How A Cost Accounting System Improved Efficiency And Profit
11 Dec 2017
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How A Cost Accounting System Improved Efficiency And Profit

Ann Marie owns a manufacturing business which makes a high-end product. She varies her design from time to time so there are many versions of her primary design.

Problem

Ann Marie did not have a cost accounting system that would determine the cost of producing each version. So she did not know which ones were cost-effective to produce and earn her more profit and which ones were not.

Solution

She engaged her Accountant to select an appropriate cloud-based cost accounting system to tailor to her needs.

The Accountant analyzed the manufacturing process and determined the basic activities involved. The next step was to create a system which would:

  • Measure how often each basic step is performed in producing a design.
  • Determine the cost of each step in the manufacturing process.
  • Use 1 and 2 above to determine the cost of each design.

Ann Marie enthusiastically uses her new cost accounting system to:

  • Measure profits derived from the sale of each design.
  • Target low-profit designs for discontinuation.
  • Help determine pricing of new designs.

Benefits for the Client

The system allowed Ann Marie to measure production efficiency and thereby grow her profit and business.

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