[Craftsman Cuts Column] Profit and Loss Management Table Used by Factory Managers to Improve Profitability

The idea that increasing profits equals reducing costs equals reducing purchasing costs has become fixed! An explanation of the measuring stick for cost accounting.

This column is the first installment of "Series 3: Improving Profitability," where experts provide insights. When managers work on production improvements, which of the two charts, Chart 1 or Chart 2, would they likely utilize to enhance product profitability? Intuitively, they might choose Chart 2. Both charts show sales of 100 yen, cost of goods sold of 80 yen, and gross profit of 20 yen, appearing to be unchanged. However, in Chart 1, the cost of goods sold of 80 yen is measured by the procurement costs of production resources necessary to create the product. On the other hand, the breakdown of the cost of goods sold in Chart 2 is compiled based on the content of production activities such as parts processing, assembly, and painting. What is the difference in costs between the two? Please take a look at the related links. *You can view the detailed content of the column through the related links. For more information, feel free to contact us.*

Production Management System