The significance of costing in companies
Costing is one of a company's core functions, yet it is often not prioritized as such. A recurring problem is that no one within the company is explicitly responsible for the development and monitoring of costing methodologies. The task of the cost accountant is usually limited to specific manufacturing processes. Inaccurate calculations – often set too low using old methods – can undermine all efforts in development, production, and sales. This problem has become evident in numerous companies. A particular weakness of traditional methods is, for example, the failure to include the main cost driver 'capacity utilization'.
Prof. Dr. W. Muschinski
„The current legacy calculation systems are not only unacceptably inaccurate, but also fail to provide a solution for the expanded requirements profile of corporate controlling needed today in the Industry 4.0 standard within the context of today's globalization.“
Prof. Dr. A.
Hoffjan
“Although the calculation of prices and costs has always been fundamental to business practice, estimates are often made 'by rule of thumb'. Furthermore, competitive prices are often not transparent.”
Prof. Dr. Th. Obermeier
A large-scale study analyzed the cost calculations of 250 companies. The findings revealed that nearly all cost calculations were significantly inaccurate, rendering performance comparisons with competitors impossible.
Prof. Dr. J.
Weber
"However, ongoing cost accounting is by no means designed for competitive analysis. Its sole purpose is operational management."
Prof. dr. M.
Boehle
"I have to be blunt: companies using the existing solution are operating under a latent risk of bankruptcy. The clock is ticking for many companies."
Costing methodology is not only an indispensable tool for sound corporate controlling but is also essential for an early warning and monitoring system as well as for competitive analyses. The prerequisite for this is a methodology that is up to the task. From static to dynamic costing. The new dynamic 'economic costing' has replaced the previously static costing and now serves as a crucial success factor. It supports both operational and strategic sales activities and enables a comparison between the current business situation and the strategically required pricing. A central element for sales success is the precise knowledge of the individual profit or loss contribution of individual products, based on current or simulated sales data. The 'cost accounting with machine hour rate' is unsuitable for all success functions and generates a dangerous company risk.