Cost Accounting For Dummies, 2nd Edition

Chapter 13

Analysis Methods to Improve Profitability

IN THIS CHAPTER

Justifying your cost allocation

Relating cost hierarchy to cost allocation

Allocating corporate costs to products and services

Tracking customer revenue and costs

Calculating sales variances

Cost accounting analysis is a balancing act between costs and profit. It’s not enough to produce a product or service at the lowest possible cost. To be profitable, you must perform analysis to compute a sale price that generates a reasonable profit. Finally, customers must be willing to pay your sale price. At this point, you need to spend some time on cost allocation, pricing issues, and sales analysis.

In this chapter you spend some quality time with sales and profits. The chapter starts by taking another look at cost allocation and how it relates to cost hierarchy, including allocating corporate costs — expenses you incur for the head office. And there’s a section that adds to what you’ve learned about customer revenues ...