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How A Cost Accounting System Improved Efficiency

Written by Greg Millar on December 7th, 2017.      0 comments

Alliott NZ Case Study

Client

retail shop store-572Ann 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.

Challenge

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

Her Accountant helped select an appropriate cloud-based cost accounting system to tailor to her needs and then analysed the manufacturing process to determine the basic activities involved. The next step was to create a system which would:

  1. Measure how often each basic step is performed in producing a design
  2. Determine the cost of each step in the manufacturing process
  3. 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 for new designs

Benefits to the Business

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

 

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