Published by:
Harvard Business Publishing
Length: 6 pages
Topics:
Cost accounting; Cost systems
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Abstract
A company needs reliable information on product costs. But sometimes it''s difficult to know if a cost system is failing to deliver. It''s time to redesign a cost system when, for instance, manufacturing managers want to drop products that seem to earn the biggest profits. Chances are those items are more troublesome than the cost system reflects. Also, when departments develop their own cost systems, it probably means the old one is no longer working properly. Sometimes changes in a company''s product market strategy or competitive environment can render a cost system obsolete. When margins are paper thin, companies need more accurate costs than ever.
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Abstract
A company needs reliable information on product costs. But sometimes it''s difficult to know if a cost system is failing to deliver. It''s time to redesign a cost system when, for instance, manufacturing managers want to drop products that seem to earn the biggest profits. Chances are those items are more troublesome than the cost system reflects. Also, when departments develop their own cost systems, it probably means the old one is no longer working properly. Sometimes changes in a company''s product market strategy or competitive environment can render a cost system obsolete. When margins are paper thin, companies need more accurate costs than ever.