Understanding should costing: Recognizing benefits and using them in practice

In an increasingly complex and globalized business world, companies are under constant cost and innovation pressure. The Should Costing method offers a strategic approach to targeted cost analysis and optimization. But what does "Should Costing Application" actually mean - and how can this method be used effectively in everyday life?

What is Should Costing?

Should costing is a systematic method for determining the theoretically appropriate costs of a product or component - based on materials, production steps, technologies and market prices. The aim is to compare the actual costs of a supplier with an internal reference value and thus reveal scope for negotiation.

Advantages of the Should Costing application

The application of Should Costing has numerous advantages:

Cost transparency: companies can see how product costs are made up - down to the smallest detail.

Stronger negotiating position: Negotiating arguments are based on comprehensible calculations and technical facts.

Efficiency in product development: cost-optimized alternatives can be identified as early as the design phase.

Targeted controlling: Deviations between target and actual costs become visible and controllable.

Areas of application in practice

Should costing is used in many areas of the company:

Purchasing: For price negotiations, supplier evaluations and make-or-buy decisions.

Development: For design-to-cost processes and early product optimization.

Controlling: For budget planning, cost controlling and profitability analyses.

Practical example: Automotive supplier

A medium-sized automotive supplier used Should Costing to analyze aluminum castings. Systematic costing not only made it possible to identify excessive supplier prices, but also to make in-house production processes more economical. The result: savings of over 12% and improved supplier relationships.

Conclusion

The Should Costing application is more than just a calculation tool - it is a decisive success factor for modern companies. Used correctly, it creates transparency, strengthens internal cost competence and enables well-founded decisions in purchasing, development and controlling.

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