Costing and Profitability Analysis refers to the underlying profitability of products and customers. In order to operate a profitable business, business managers need to have a robust understanding of the underlying costs and profits of its products and customers. These metrics help the business to understand the opportunities and challenges that they are faced with and guide business managers into areas of business opportunities.
The Challenge
Product costing and Customer profitability analyses are complicated by the fact that multiple activities typically go into the manufacture of each product or to service customers . It is challenging to correctly identify the costs resulting from these activities directly as well as assigning the basis by which these products/customers acquire their share of indirect and overhead costs (supervision, quality, maintenance, utilities, and travel). Additionally, ongoing business changes result in changes in mix of products or customers or the introduction of new products can often have a significant impact on a number of cost elements.
The Solution
SCA’s solutions are based on sound Activity Based Costing principles that operate in conjunction with a sophisticated operational model to provide accurate representations of manufacturing activities (e.g. routings, equipment manning, shifts). This serves as a rigorous framework to enable a detailed and accurate understanding of current product costs and their profitability. SCA’s solutions also serve to reliably predict the impact of business decisions on the total system costs and the resulting cost and profitability of products. SCA’s solutions enable business managers to evaluate the cost of introduction of new products under different manufacturing scenarios and simultaneously provide them the impact that these products will have on the costs of existing products – all before production begins!
