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Components of price. Image according to Garrett (2008), figure 4-1, p.65. In business economics cost breakdown analysis is a method of cost analysis, which itemizes the cost of a certain product or service into its various components, the so-called cost drivers.
However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management. [ 1 ] Other aspects of cost leadership include tight operational controls across the business, avoidance of customers whose needs incur additional costs, and limits on expenditure in areas such as ...
Cost accounting is defined by the Institute of Management Accountants as "a systematic set of procedures for recording and reporting measurements of the cost of ...
Following strong initial uptake, ABC lost ground in the 1990s compared to alternative metrics, such as Kaplan's balanced scorecard and economic value added.An independent 2008 report concluded that manually driven ABC was an inefficient use of resources: it was expensive and difficult to implement for small gains, and a poor value, and that alternative methods should be used. [4]
A cost centre is a department within a business to which costs can be allocated. The term includes departments which do not produce directly but they incur costs to the business, [1] when the manager and employees of the cost centre are not accountable for the profitability and investment decisions of the business but they are responsible for some of its costs.
Cost engineering is "the engineering practice devoted to the management of project cost, involving such activities as estimating, cost control, cost forecasting, investment appraisal and risk analysis". [1] "Cost Engineers budget, plan and monitor investment projects. They seek the optimum balance between cost, quality and time requirements." [2]
[A] cost driver is any factor which causes a change in the cost of an activity. [ citation needed ] However, a different meaning is assigned to the term by the business writer Michael Porter : "cost drivers are the structural determinants of the cost of an activity, reflecting any linkages or interrelationships that affect it". [ 1 ]
The work breakdown structure provides a common framework for the natural development of the overall planning and control of a contract and is the basis for dividing work into definable increments from which the statement of work can be developed and technical, schedule, cost, and labor hour reporting can be established.