Title: Your Product-costing System Seems to Be Broken
Abstract: As a major user of product costs, the industrial marketer may be the first to observe that product costs no longer seem appropriate. When this happens, what can be done? Inappropriate product costs usually arise because of the handling of manufacturing overhead, which is not traceable to products. This article describes three types of adjustments in the handling of manufacturing overhead: (1) change the denominator used in computing the overhead rate to one that better reflects differences in product demands on manufacturing facilities, (2) divide manufacturing overhead into multiple cost pools yielding multiple rates to reflect differences in intensity of use of different segments of manufacturing facilities, and (3) use denominators that represent batch- and product-level in addition to unit-level cost drivers together with multiple cost pools, as in activity-based costing. The article concludes with a list of changes in operations and environment that may indicate that it's time for a change.
Publication Year: 2001
Publication Date: 2001-10-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 17
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