Problem—The Process of Calculating Costs

We’re on a roll, humming along. Everything is fine because we have all the information we want and need to manage operations and cash. The goal of the company is to make money, and we have an analysis that helps us understand how much we have at any given time, whether we are making money, the extent to which we are, and the levers that allow us to improve how much we can make. We know how much capacity we bought, how we consumed or used it to create the output and how efficiently, effectively, and productively we’ve done so. We also know what we’ve sold and collected. We can calculate practically any key managerial metric, cleanly, from these data. But when someone asks, “What did the output ...

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