By Bob Value, Deputy Director for the SVA
Recently Sewn Consultant Jack Bardol and SVA's Deputy Director Bob Value presented a well received seminar on costing and pricing strategies for manufacturers in northwest Pennsylvania.
The goal in developing an effective pricing strategy is to understand your product costs and what the major cost drivers are in your company. The challenge in manufacturing is there is a major disconnect between how Generally Accepted Accounting Practice or “ GAAP” financial statements are prepared and how manufacturing operating managers need to think about their business operations.
GAAP requires that labor and overhead costs are absorbed or added to inventory value. The addition of labor and overhead values to inventory was a way for income taxing authorities to increase taxable income. The concept, called absorption, has been embraced by the accounting establishment and has become a GAAP. Whether you have reviewed or audited statements from your accountant, as a manufacturer, they are required to present your statements using the absorption concept.
SEWN often finds that smaller manufacturing firms struggle with these issues. The seminar was aimed at providing the attendees with simple and intuitive methodologies for establishing costs and strategies for establishing pricing in various situations.
For more information on how SEWN can help your company, contact Bob Value at 412-342-0534 or your local SEWN Regional Director.
