Profitability Analysis is key to organizations' ability to understand what they should focus on in the future. There are many different ways to analyze profitability, from backward looking trend analyses to predictive modelling of the future. There are also many ways theories about how profitability should be analyzed. Profitability costing is the concept of assigning all costs incurred by a company to the various products or relationships the organization maintains in an effort to determine which products or relationships are the most profitable. This information can be utilized to help better position the company in the future by recognizing which types of activities are beneficial to the organization and which are not. There are many ways to assign the costs incurred by the company to different products, relationships or services, and many of them are based on some type of driver. While many companies consider Activities a good basis for drivers, there are many possibilities. The driver is used to allocate costs across the various products, relationships or services. Once the costs are allocated they can be matched to revenues derived from product sales, services revenue or any type of customer relationship.
There are many types of software that allow a company to help create a Profitability Costing model. MindStream Analytics is well versed in Profitability Costing and can help your company figure out what can best help your company create a Profitability Costing module.