LSM534 - Measuring and Improving Margins

Course Description

Measuring and making sense of profit margins on an organization's different products and services requires an accurate assessment of the true costs of delivering those products and services. This online course will teach you how to analyze the true cost of products and services that rely heavily on shared resources (often called "overhead"), how common methods of reporting these costs lead to distorted decision-making, and devise reports that link reported costs to business strategy in the most effective ways.

This course provides students with an understanding of the basic tools organizations use to identify the total costs of the resources they consume, and allocate those costs to particular managers, products and services. These tools can be used to improve the overall effectiveness of the organization by:

• Evaluating margins performance more accurately.
• Charging costs to discourage the use of particularly costly resources.
• Setting prices to ensure that each individual product or service is covering its costs.
• Adjusting the mix of products and services toward those with high margins, and away from those with low margins.

Faculty Author

Benefits to the Learner

• Explain the different types of costs your organization faces, and what cost-related information (e.g. margins, efficiencies, etc.) is most important to the business of your organization
• Describe how accountants allocate costs to individual products, services, departments and managers, and be able to interpret key reports that reflect those allocations
• Calculate the costs of a product or service under a two-stage system of overhead allocation, and determine whether these reported costs will rise or fall when overhead is allocated differently
• Identify the forces and activities that drive overhead costs in your organization?especially those that may be overlooked or oversimplified by your cost accounting system?and how these cost allocation problems distort margins
• Identify and avoid common decision-making pitfalls that result from an inaccurate or incomplete understanding of the costs of serving customers

Target Audience

People at all levels in any functional area in for-profit, not-for-profit and governmental organizations who want to be more effective in:

• Specifying organizational strategy, or implementing the strategies specified by others.
• Linking performance evaluation and incentives to organizational strategy.
• Revising strategy and operations to accomplish strategic goals at lower cost.
• Helping employees collaborate and work together across departments and functional areas, and communicate more effectively with colleagues about the goals and performance of their organization.

Accounting and finance people will also benefit enormously from this program. This series applies the work of accounting, measurement, and thinking strategically about costs and performance in every corner of an organization.