Clear Economy Management
The tasks of financial directors, controllers and other company specialists operating in the area of production or logistics is more effective and simpler thanks to the Business Navigation System („BNS“). By means of the functional area of the Cost Efficiency and Profitability (“CEP”) it is possible to plan and control the ratio between the profitability and sales of separate product groups, series or brands. Profitability analyses may be then carried out from many points of view, namely, that of the customers, distribution channels, regions and, of course, while utilizing variant costing procedures selected depending on the company conditions in particular.
Cost efficiency and profitability enable managers quickly to verify the profitability of sold products, goods or services by utilizing more variants of calculation procedures. Each of them is utilized to solve different decision making tasks. Variable costing makes the base to select the specific order upon non standard conditions, and full costing models the costs upon different conditions of loading the capacities. The proposed costing system orientated on the company management makes it possible to differentiate fixed and variable costs, so that the information value of the overall costing system is considerably increased.
CEP does not merely involve the simple costing and profitability information on the level of individual products. BNS immediately identifies the causes of variances and the resulting personal responsibility. At the same time it offers the next procedure, i.e. it is not orientated toward the past but its objective is to deal with and resolve the presence and to offer a view of the future.
Crucial views of the product profitability are brought to managers e.g. by the break-even point analysis (“BEP”), customer profitability, etc. At the same time users may pro-actively enter the planning process at any time whatsoever and reflect the changes of separate indicators made up to the level of the overall company profit. Decisions to be taken on which products and projects are to be further supported or how the productions of individual products are to be combined is then much easier.
Control of the cost efficiency and product profitability is supported by two separate modules, namely, Variable Costs (“VC”) and Contribution Margin (“CM”). VC module serves to set up the plan of variable unit material, labour or other costs. Material costs include the amounts of inputs comprised in the design drawings, prescriptions or production or costing standards. Labour costs may be stated on account of work operations directly related to products.
CM module also includes as its part the multiple-step calculation, which makes it possible further to clarify the information more. E.g. the cover contributions may be split into more levels depending on the organizational or processing composition of direct fixed costs. CM module also offers an absorption costing approach to product costs, so that also indirect costs may enter the costing model.
BNS CEP benefits
- Connection to the sales performance module makes it possible to model profitability while simulating change in product prices.
- It enables to work with the eligible costing model, as well as the individually specified contribution margins, and to control the break-even point (“BEP”).
- It applies the costing model, which serve various decision making tasks, e.g. price-fixing processes, profitability analysis, employee motivation, etc.
- It links controlling methods of both variable and full costing;
- It provides an opportunity to utilize alternative overhead bases. Thanks to that one may identify, for example, which of the indicators selected as the overhead base correlates with the cost effectiveness development as the most accurate one.
- It enables an application of the Activity Based Costing/Management.
You should decide for BNS CEP if …
…you wish to know how a change of the product structure will be reflected in their resulting profitability;
…you need alternatively to reflect the changes of purchase prices in the product profitability within the entire scope of the range of goods sold;
…you need to know the cost effectiveness upon different utilization of the capacities of production facilities and centres;
…you attempt to make the customer and product portfolios more effective.
- Adjustment of direct input consumption
- Transfer of direct input prices
- Adjustment of direct unit costs
- Overheads allocations
- Calculation of overhead coefficients
- Transfer to the next calculation step
- Overheads allocation to products
- Profitability analysis
- Plan fulfilment chessboard
- Variance analysis
- BEP analysis
- Contribution margin structure
- Contribution margin per customer