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Management Program Based on Comparative Cost Analysis¹

Dairy Service, Incorporated, Lexington, North Carolina

ABSTRACT

A management program based on cost analysis will aid any management in reaching a better decision. Five applications of cost accounting as a management tool are:

1. A comparison with other operations, to determine if the operation is just drifting or making real progress.
   
2. A comparison of the operation to its own flexible standards to determine if the performance is up to capabilities.
   
3. A platform cost for each item manufactured.
   
4. An individual route profit and loss statement.
   
5. An accurate method by which the future costs of an operation under varying conditions can be projected.
   

Information alone will not insure an efficient operation unless it is properly applied. Cost accounting makes no decisions. It may point out that several items are being sold below cost or that a particular route is losing money. It is up to management to determine why the cost of manufacturing is high and it must analyze the figures to determine why it is losing money. Cost accounting is a tool of management and not a substitute for management. It is up to the man in management who is responsible for the proper application of this tool to make the right decision.

Publication limitations did not allow the printing of a sample budget, unit cost data, route profit and loss statement, or volume cost graphs. These may be obtained on request from the author.

¹ Presented to the Dairy Manufacturing Extension Section at the 57th Annual Meeting of the American Dairy Science Association, University of Maryland, College Park, June, 1962.