This PPT slide, part of the 62-slide Product Line Profitability Analysis PowerPoint presentation, presents a comparative analysis of product line profitability, focusing on gross margin and operating margin for 3 products: T-54, K-93, and J-88. The key message emphasizes the importance of accurately allocating all indirect costs to products. Without proper allocation, managers risk misjudging the true profitability of each product.

The graph illustrates the cost structure per unit for each product, breaking down costs into categories such as R&D, sales and marketing, distribution, and overhead. The total price for each product is also displayed, allowing for a straightforward calculation of gross margins. For instance, the T-54 has a price of $750 with a cost structure that suggests a significant gross margin. However, when indirect costs are considered, the profitability picture shifts.

The note at the bottom highlights that while J-88s appear most profitable based on gross margin alone, T-54s actually yield higher profitability when all indirect costs are factored in. This discrepancy underscores the critical nature of comprehensive cost accounting practices. It suggests that decision-makers need to be cautious when interpreting profitability data, as incomplete cost allocation can lead to misguided strategic choices.

This slide serves as a reminder for executives to ensure that their accounting systems are robust enough to provide a complete view of product profitability. Understanding the nuances of cost allocation can lead to better-informed decisions regarding product management and resource allocation.

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Product Strategy Product Management Cost Accounting Sales