Calculate product costs correctly: Methods, strategies and proven practical examples
Product costing is the backbone of a competitive pricing strategy. If you want to calculate your products, you not only need to know the direct material and production costs, but also correctly allocate indirect overheads. In this article, we provide a compact overview of common methods, strategic approaches and proven practical examples of effective costing.
What is product costing?
Product costing is a business management process that systematically records the costs of manufacturing or selling a product. The aim is to create transparent cost structures and make well-founded pricing decisions.
Overview of common calculation methods
1.Surcharge calculation
The classic method in which overhead costs are added to direct costs as a percentage. Simple and widely used in practice.
2. contribution margin accounting
Ideal for short-term decisions. Only variable costs are taken into account here - the focus is on the margin.
3. activity-based costing
This modern method allows a more precise allocation of overheads by looking at individual processes. Particularly helpful for complex production processes.
Strategies for optimizing product costs
-Analyze cost centers regularly: Identify unnecessary sources of costs.
-Check make-or-buy decisions: What is worthwhile internally, what externally?
-Utilize economies of scale: Larger quantities often reduce unit costs.
-technology: Digital tools for automated costing save time and reduce errors
Best practices from the field
Example 1: A medium-sized mechanical engineering company implemented activity-based costing and was able to save 12% of overheads as a result.
Example 2: A start-up relied on agile costing with digital tools and was able to adjust its break-even analysis in real time - a clear competitive advantage.
Conclusion
Solid product costing is not a luxury, but a must for any competitive company. With the right method, sound analysis and modern tools, products can be calculated that not only cover costs but are also in line with the market.
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