Archive for June, 2011


Idle Capacity: Boiled Alive by Cost Management

When conditions gradually change, we often fail to recognize the magnitude and consequences of the change. Consequently, we also fail to take action appropriate to the change. Just as a frog swimming in a pot of cool water over a fire, fails to recognize the gradual warming until it is too late, we continue with […]

Read More...

Gross Margin: A Concept Not So Gross

Frequently we hear the question, “How do we allocate Management to product cost?” The person posing the question is going down their company’s chart of accounts and attempting to allocate every account to product cost. This person is typically implementing Activity-Based Cost or ABC and wants a Fully Absorbed Cost.

Read More...

Beware the Business Death Spiral

Today’s economic environment is constantly changing. While a lot of press is devoted to the global recession, reality is that the competitive environment for any business is constantly changing. Even within the business’s product portfolio, products are at different points in their life cycle. With product life cycles constantly and dramatically shortening, how do managers […]

Read More...

The Hidden Trap of Marginal Costing

Back in business school, my professor presented us with a case study. The core question of the case was whether to take an order where the price was at a significant discount from normal pricing and less than the full cost of the product. Of course the natural conclusion was to refuse the order. Why? […]

Read More...