Apart from routine accounting, additional tools are available to micro-evaluate jobs and processes, as explained below:
job costing is a powerful tool for pricing individual jobs in today’s competitive world and monitoring the profitability.
Job Costing is a must for both Construction and Manufacturing industries, where every job has different specification and its unique cost model. Most of the contractors use linier foot or per window or such other costing concepts, which may be easier to use for estimation purposes.
However, for tracking costs, these methods are very ineffective because the costs are booked by the type of cost, like Payroll, Material Purchase, Equipment Rental and so forth, where as the cost per Window or a linier foot includes a combination of all direct costs.
If the estimate clearly identifies the amount of material and labor, then at the time of writing checks, one can always compare the actual material and payroll costs. Invariably though, businesses use job costing for estimation purpose only. Tracking jobs and its profitability are never focused upon.
We can help you set up right cost estimating system so that estimating and tracking the cost for the job both become easy.
Every industry is different, has its own pricing system and the market determines the pricing levels.
Relationship with the customer, Quality and capacity of production, and the Pricing are the three most critical factors in gaining or losing a contract.
Whether you are trying to enter the market, maintain your market share or trying new avenues to increase the business, product pricing is a very critical factor in economic well-being of your company.
If the pricing is high – you lose the business
If the pricing is low - you gain the business but the profitability of the business suffers.
Pricing has to be just right and therefore, the Costing has to be right and therefore, company’s efficiency levels have to be in control.
Process Costing is a science of estimation and can be used very effectively, where different processes complement each other to produce the final outcome.
Vitamin or chemicals manufacturing companies are a typical environment where 20% of product A is added to 45% of product B and there is 3% Evaporation and so forth. However, there are service departments that support the manufacturing department; for example, a Graphic Art department provides designs to Cutting Department or Silk Screen Department and so forth.
Whether these service departments’ costs are directly calculated and added to the product cost or indirectly added as a ratio or percentage, the costs have to be properly calculated and added for proper pricing.
Again, more than estimating and pricing, these models are more useful for following up actual costs to maintain profitability.
What is your Break-Even point? How can you put this tool to work for you?
This exercise helps businesses maintain profitability and come up with a pre-emptive strike to cut costs, processes or product lines, if they start generating losses.
The Break Even level is the minimum level of activity or sales level, below which, the company is losing money and above which, the company has super profits.
With changes in cost structure, breakeven levels keep changing. However, we make it our business to evaluate every process and the company as a whole and provide constant feedback to our clients so that they can monitor their activities.
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