What is costification
Costification is a procedure carried out by companies that decide to analyze the actual cost involved in the creation of a product.Many companies, both when they are ready to launch a product on the market and when they want to improve the production of an existing product, decide to evaluate the expenditure incurred at the moment it is produced. Thanks to this data, various strategies can be applied whose ultimate goal is to improve productivity or even just one of the processes that allow the creation of that product.
What is costification used for
Costification is a procedure that has several objectives, one of which concerns the choice of the final price of the produced product.A second aim is to subject that specific product to a thorough analysis and understand the different costs generated during the processing phase. For example, the assembly of various electronic parts, which could be carried out within the company, could have a reduced cost on a large scale compared to what would be incurred if outsourcing to external companies.
At the same time, thanks to this analysis, it is possible to improve the production process since there is an opportunity to achieve a reduction in costs without, however, affecting the quality of that product.
These are the various aspects that must be considered when performing the costification of a product, a procedure thanks to which a company can significantly improve its activity by avoiding any potential problems.
The cost calculation object
The cost calculation object depends largely on the type of product that the company produces and markets.In fact, there are activities that involve the production of several products clearly distinguishable from one another, each of which has its own characteristics and production cost that may be significantly different from those of other products from the same company. In such cases, the product cost is therefore calculated per job, i.e., for each single item produced.
Then there are activities that involve the production of many varieties of goods, which however can be grouped into homogeneous groups composed of similar products. In this case, the product cost is sought by batches, i.e., for homogeneous groups of products.
Cost configurations
When we determine the cost of a product, we must make a series of choices, and among these, the most important of all is that of the purpose: why we want to know the cost of a certain object.One of the reasons why the purpose is particularly important can be seen in the details: depending on the objective I set, there are costs that I define as specific, costs that I define as general and which I then have to allocate, and costs that do not interest me at all.
Depending on the purpose, we can decide to find:
- the prime cost
- the industrial cost
- the total cost
- the economic-technical cost
Glacom is a company specialized in consultancy for the optimization of business processes and product costification is one of the most requested services by our Clients. We have a team of experts and engineers ready to analyze in a thorough and analytical way every phase of your industrial production, contact us for a non-binding appointment to understand how we can help you.
