Chapter 21
Ten Ways to Increase Profits Using Costing
In This Chapter
Selling the most profitable products
Forecasting a reasonable profit
Planning to identify more costs
Training to improve performance
Cost accounting’s big payoff is making improvements to a business. This chapter covers some of those improvements. You can use cost accounting to identify costs and reduce them. Better cost control results in a lower total product cost — and a higher profit. As an accountant, you can apply these ideas to the business and be a hero.
Selling More Of The Right Products
Your company wants to sell more of the most profitable products because those sales increase the company’s overall profit. You can compare profit levels using cost accounting. When you know the correct full cost of a product, you can compare it to the sales price. The difference between the two is the profit for the product.
Compare the profit generated by each product. To make a fair comparison, compute profit as a percentage of sales, or profit ÷ sale price. The products with the highest percentages are the most profitable. ...
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