Product Costing for Manufacturing: 5-Week Assessment

RSM Product Sales LLC

RSM’s Product Costing Assessment for Manufacturing enables our clients to better evaluate pricing, optimize their cost structure to improve product margin, and enhance their management capabilities.

As the Manufacturing industry continues to experience supply chain challenges, it is becoming more important for organizations to implement a framework to analyze and update costs to keep pace with ever-changing markets. A more proactive, holistic approach to product costing, coupled with the utilization of platforms like Microsoft’s Dynamics 365 for Supply Chain, Dynamics 365 for Finance and Dynamics 365 Business Central, can assist with breaking down critical cost drivers and identifying areas for potential cost cutting, increasing efficiency, and determining corrective actions.

By analyzing key overhead, labor, and material costs within an operation, RSM’s Product Costing Assessment identifies the total cost associated with producing items and operating work centers. Additionally, this assessment will identify existing technologies to better leverage their capabilities and output for integration of costing data back into an ERP (Enterprise Resource Planning) system.

A costing assessment will begin by grouping all costs associated with the business into direct labor, manufacturing overhead, procurement of raw materials or SG&A (Selling, General, and Administrative Expenses). Furthermore, our team will identify key work centers utilized to process or manufacture items. Once completed, the team will use this information to develop a cost model that provides a current state view of all manufacturing and overhead costs by work center and product. This model will then be provided to the organization with clear process instructions so they can own and utilize the model going forward. Additionally, RSM will provide a timeline for future state enhancements to the costing methodology, data structure and existing technology.

Below is an example agenda for an RSM Product Costing Assessment:

Week 1: Phase “Discovery”

  • ‘Process Overviews’ session
  • ‘Base Data Analysis’ exercise

Week 2-3: Phase “Analysis”

  • ‘Conceptual Model Review’ session
  • ‘Cost Allocation Review’ exercise
  • ‘Work Center Identification’ exercise
  • ‘Cost Model Creation’ exercise
  • ‘Product Process Matrix Creation’ exercise
  • ‘Cost Model Finalization’ exercise

Week 5: Phase “Roadmap”

  • ‘Improvement Recommendations’ session
  • ‘Cost Model Pass-off & Training’ exercise
  • ‘Profitability Analysis’ exercise

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