“What is their REAL cost?"

Cost accounting principles for your current and growing business.

Accounting for costs rather than outlays.

FCA = Full Cost Accounting

The language of your CPA.
Do you really understand it?
What does it cost you and your business to not understand it?
What changes in planning do you need to make?
What changes in implementations do you need to make?
What impact should this information have on your needed pricing and profitability?

An outlay is an expenditure of cash to acquire or use a resource.
A cost is the dollar value of the resource as it is used OVER TIME.  (This includes depreciation and maintenance and disposal)  Accounting years VS actual use
Do you need to replace goods at the end of accounting life?  If you keep a fully depreciated item, how do you handle the accounting
 
Accounting for hidden costs. With FCA, the value of goods and services is reflected as a cost even if no cash outlay is involved. One community might receive a grant from a state, for example, to purchase solid waste equipment. This equipment has value, even though the community did not pay for it in cash. The equipment, therefore, should be valued in an FCA analysis

Accounting for overhead and indirect costs to individual solid waste services. FCA accounts for all overhead and indirect costs, including those that are shared with other public agencies. Overhead and indirect costs might include legal services, administrative support, data processing, billing, and purchasing

Accounting for past and future outlays. Past and future cash outlays often do not appear on annual budgets under cash accounting systems. Past (or upfront) costs are initial investments such as the acquisition of vehicles, equipment, or facilities.

Future (or back-end) outlays are costs incurred to complete operations such as landfill closure and postclosure care and post-employment health and retirement benefits. Security guard at a closed faclity.

Accounting for costs according to activities or paths. or processes
ABC is not the same as cost accounting, although some cost accounting systems are built around the concepts of ABC. ABC is not the same as estimating or quoting, although ABC provides information that makes estimating and quoting more precise and reliable. ABC is not a shop control system, although ABC may help a shop understand what it really needs to control and what it doesn't.

The underlying concept of ABC is that the jobs, services, or products provided by a shop create activities and those activities create costs. All of the costs not directly attributable to these jobs, services or products must be associated with the activities that make them necessary. Then each activity's accumulated costs must be associated with the jobs, services or products that make them necessary and then the accumulated costs must be distributed among the jobs by some logical basis—a formula or rate.

By making shop managers think about activities in relation to costs instead of just thinking about jobs in relation to costs, ABC allows a truer, more complete picture of costs to emerge. The cause-and-effect relationship of costs and jobs becomes clearer. For example, when it becomes obvious that a certain kind of job causes activities that the shop ultimately must pay for, the shop can develop some kind of formula for directing an appropriate portion of that activity's cost to that kind of job. The formula usually breaks down the accumulated costs of that activity (what that activity cost for a whole year, for the whole plant, for all employees and so on) according to some statistical basis to be applied as a rate—per incident, by the square foot of plant space, per worker, and so on.

lessons learned
Just because a process is obviously more efficient doesn't mean it's necessarily more economical.

There is far more than this to calculate for a measure of profitability.

Assembled, Edited, Enhanced and Shared by:
Pointer Consulting
David Bruce Savage ♦ Founder and leader of Inventor’s Education Forum in Jacksonville Florida   

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From my varied work and personal experiences, as well as my leadership of two inventor’s education groups, I provide advice for saving time, money and frustration for inventors, product developers. And I’ll point out the devilish and challenging details that others often avoid sharing.

Whether you are just exploring the viability of your ideas or have products on the market it will be well worth your while to spend some time with me.  Dave