Posts Tagged ‘PPMMEE’


Beware Unit Cost Traps

Recently in an online cost management forum, someone contributed a story to show the danger of a particular costing methodology. However, his conclusion was misdirected. The story went something like this: There was an old baker who became ill and had to go to the hospital. His son came home from the university to keep […]

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Customer Profitability: A One Way Street

Accountants love to tick and tie numbers, and sometimes become insanely excited when their numbers balance. This insanity is to their advantage when they are providing their “Control” function. In case others reading this article don’t know, accountants have multiple roles or functions in business. One is “Control” – Make sure money and assets are […]

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Activity-Based Cost: More Than Numbers

Activity-Based Cost or ABC has gained wide acceptance as a modern cost methodology incorporating cause and effect and cost visibility. ABC provides relevant information for management decision making. However, some have criticized ABC for a singular focus on cost and profits. This criticism is misguided. While Activity-Based Cost does have a strong cost base, it […]

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Activity-Based Cost: Three Reasons To Avoid It

Activity-Based Cost or ABC has proven itself to be superior over traditional costing methods. Most traditional methods evolved during the early industrial age when life, while more complex than an agrarian culture, was simple. The introduction of computers and modern data processing triggered the rise of ABC giving people the power to manage data driven […]

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Three Cost Allocation Myths

Cost allocation is used in all sorts of business and government enterprises to distribute the money the entity spends to those that “deserve it”. For some, this means that cost incurred by one department should be spread between other departments that benefited from the expense. For others, this means that cost must be distributed to […]

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Fake Cost Drivers for Administrative Overhead

A recent discussion in an online cost modeling forum related to “Which cost drivers can you use to assign administration overheads to a wide product range in a manufacturing concern.” As the discussion evolved, one response said “it is best done through the driver of turnover of the product produced. … because the efforts of […]

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Fixed and Variable Costs — The Dilemma

Back in my college days, the university required two courses in economics: Macro Economics and Micro Economics. It was hard to reconcile the two courses. What is hard fact in one was flakey in the other – and vice-versa. As a student it drove me crazy.

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Budgeting for Standard Costs: Why Bother?

Recently I attended a conference addressing planning and budgeting. Most presenters and attendees wanted to reduce their reliance on formal budgeting processes. However, at lunch, I sat at a table with two attendees from one company. As our discussion evolved, they were worried about having to expand their budgeting processes. As this direction ran counter […]

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Financial Reporting versus Costing: Which is Right?

When attempting to calculate the cost of products and services, people often cite practices used for external financial reporting. Then they attempt to use these practices for internal decision making. Perhaps in an ideal world, this may be a valid path. However, we live in a world far from this ideal. In our world, external […]

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Customer Service: Nothing So Useless?

In recent years, I’ve observed a much needed trend toward better customer service and “Listening to the voice of the customer”. In general, I applaud this trend and support this goal. However, even a worthy objective does not prevent us from doing something stupid. Sometimes, an ideal, such as customer service, creates an environment where […]

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