Manufacturing Cost & Profitability
Volume-based overhead allocation distorts product costs in manufacturing. The SKU that looks most profitable is often subsidised by higher-margin products. ABC / TDABC shows you the real picture.
The Manufacturing Costing Problem
Traditional standard costing in manufacturing allocates overhead as a percentage of direct labour or machine hours. This works when product complexity is uniform – which it rarely is. Complex, low-volume SKUs are systematically undercosted; simple, high-volume ones are overcosted.
Distorted Product Margins
When overhead is spread by volume, high-complexity products appear more profitable than they are. Managers invest in growth that destroys margin without knowing it.
SKU Portfolio Blindness
Companies with hundreds of SKUs often have no idea which 20% generate 80% of profit. Rationalisation decisions are made on revenue alone, ignoring true cost-to-serve.
Pricing Without Grounding
Quotes built on distorted standard costs lead to winning the wrong business – complex, low-margin orders – and losing the right business to competitors who know their numbers.
What ABC / TDABC Delivers for Manufacturing
We build a full ABC / TDABC cost model that traces all manufacturing overhead – setup, tooling, inspection, logistics, rework, scheduling complexity – to individual products and SKUs.
True Product Cost
Every product gets its real fully-loaded cost: materials, direct labour, and all indirect costs allocated by actual resource consumption. No more cross-subsidies hidden in average rates.
SKU Profitability Ranking
A complete ranking of your SKU portfolio by true margin. Instantly see which products to grow, reprice, simplify or discontinue. Typically we find 15-25% of SKUs are margin-negative.
Production Mix Optimisation
With true product costs, your commercial and operations teams can make aligned decisions on order acceptance, pricing, minimum quantities and product rationalisation.
How We Engage with Manufacturers
We work with discrete manufacturers, process manufacturers, and mixed operations across Europe. Our TDABC approach is designed to work with your existing ERP and financial data.
Profit Check
A free diagnostic to assess the degree of overhead distortion in your current costing model and estimate the impact of an ABC / TDABC correction on your reported margins.
ProfitAudit 360
A 5-25 day structured engagement delivering a full ABC / TDABC product cost model, SKU profitability ranking, and a commercial and operational roadmap.
Ongoing Advisory
We support integration of the model into your standard reporting, pricing decisions, and annual budget process – so the insight compounds over time.
Know Your True Product Cost
Start with a free Profit Check to quantify the overhead distortion in your current manufacturing cost model.