Profitability and Cost Structure Analysis: Internal Data Analysis Frameworks (PowerPoint PPT)

DESCRIPTION

Profitability and cost structure analysis provides many invaluable insights. Obvious examples include identifying profitable products and projects and identifying key cost driving activities and resources—which lead to better strategic decisions.

There are a number of business frameworks to conduct profitability and cost structure analysis. In this consulting training series, we will discuss 4 common frameworks split into 2 categories:

1. External Data Analysis
2. Internal Data Analysis

This deck will focus on Internal Data Analysis only.

This PPT delves into cost driver analysis, providing a comprehensive understanding of the underlying cost base and identifying opportunities for improvement. It emphasizes the importance of quantifying strategic opportunities and enhancing pricing and production decisions. The analysis is closely linked to Activity Based Management, explaining the main drivers of costs.

The presentation also covers the value chain approach, assigning costs to each step and identifying major activities. This method allows for a detailed examination of cost drivers at each stage, enabling businesses to validate cost allocations through client workshops. Understanding these drivers helps in pinpointing relative differences in overall costs based on scale, experience, technology, and location.

Activity Based Costing (ABC) is highlighted as a more effective tool than conventional costing systems. By focusing on business activities and corresponding activity drivers, ABC provides a clearer picture of product and customer profitability. This model traces the flow of resources to products and services, offering insights into resource allocation and cost management.

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Source: Best Practices in Cost Structure Analysis, Data Analysis, Profitability Analysis PowerPoint Slides: Profitability and Cost Structure Analysis: Internal Data Analysis Frameworks PowerPoint (PPT) Presentation, LearnPPT Consulting