Costing for Growth: Systems, Decisions and Strategic Cost Management

Growing businesses often lose money on products, channels and customers they believe are profitable. Sales rise, the factory is busy, a supermarket takes the product, and then the bank balance says otherwise. Simple costing, one product, one price, one set of fixed costs, stops telling the truth once there are shared overheads, production stages, losses, several channels and customers who pay late.

This course shows you how to cost a business that is growing. You will answer three questions: What does each product really cost when overheads are shared? Which products, channels and customers make money? How do I keep costs down as I grow?

You will follow a fictional savings club two years on. Its members have grown: one now runs a drinks factory with two cost centres and four sales channels; others run a curtain workroom, a broiler farm that now dresses its own birds, a bakery with a night shift, a phone shop with company customers and an events hire business. Each makes a judgement mistake that growing businesses make, owns it and fixes it with the right costing method.

What you will learn

• Choose the right costing method for the question you need to answer, using a costing methods map
• Set overhead absorption rates by cost centre, and read under- and over-absorption
• Explain why marginal and absorption costing give different profits when stock changes
• Cost production in stages, with equivalent units, normal and abnormal losses, and joint and by-products
• Make decisions on relevant costs: special orders, limiting factors, bottlenecks, make or buy and dropping a product
• Measure profit by channel and by customer, including the cost of serving them and the cost of credit
• Split material variances into price and usage, and act on each
• Use target costing, value engineering, kaizen, the cost of quality and life-cycle costing to keep costs down as you grow

Your toolkit

Every worked example is a spreadsheet grid you can copy into Excel, with the formulas listed cell by cell. Each module ends with a toolkit, worked and blank: an overhead rate sheet, a process cost sheet, a decision sheet, a channel profit statement with a variance report, and a one-page monthly costing pack. The last lesson brings every method, formula and credit together in one course reference.

Who it is for

Owners and managers of growing small and medium businesses, and the accountants, advisers and lenders who work with them. The course builds on Know Your Costs: Practical Costing and Pricing for Small Business (course 58) or equivalent knowledge of contribution, break-even and cost cards; the first lesson recaps them. Basic Excel or a similar spreadsheet is enough.

How the course works

Five modules, each with four lessons and a short scenario quiz. You need 70% on each quiz to complete the course and earn your certificate. Each method is explained with the professional term first and credited to its originators where it is taught. Every person, business and figure in the case is fictional and illustrative, not a benchmark; use your own figures. The course does not prepare you for any certification exam.

This course teaches standard costing methods in its own words and credits each method’s originators where it is taught. It is not endorsed by, or affiliated with, any author, standard-setter or organisation named in it.

This course teaches costing; it does not promise that any business will succeed or earn a particular income. Results depend on your market, your prices and your decisions.