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Cost Accounting For Dummies by Kenneth Boyd

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Chapter 21

Ten Ways to Increase Profits Using Costing

In This Chapter

arrow Selling the most profitable products

arrow Forecasting a reasonable profit

arrow Planning to identify more costs

arrow 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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