What is distribution cost analysis?
Distribution cost is the sum total of all those expenses which are incurred by the producer of a product in order to make possible the delivery of the product from its location to the location of the end customer.
What are the various methods that can be used to analyze distribution costs?
Methods of distribution cost analysis are a cost-benefit analysis, activity based, or resource consumption style of cost accounting. Managerial accountants have the most responsibility to review these costs and send a report to upper management.
What are distribution costs?
Typically, distribution and transportation costs for consumer packaged goods companies range from 6% to 8% of revenues (see Figure 1). In our experience, companies with inefficient networks can lower their distribution network costs by 10% to 25% by upgrading their systems (see Figure 2).
What are examples of distribution cost?
Distribution costs may include the following:
- The movement of goods to resellers and customers.
- Transport fees and tolls.
- Warehousing costs.
- Costs to maintain a fleet of transport vehicles.
How do you find the distribution cost?
Distribution cost is the sum of all expenses (direct and indirect) incurred by any company, firm, individual, or any other entity to deliver their products from the production department to the end consumer.
What is meant by the term standards in the context of distribution costs?
Standard is a predetermined measurable quantity set in defined conditions against which actual performance can be compared, usually for an element of work, operation or activity. “Standard cost is a predetermined calculation of how much costs should be under specified working conditions.
What are the three types of cost analysis?
Cost allocation, cost-effectiveness analysis, and cost-benefit analysis represent a continuum of types of cost analysis which can have a place in program evaluation. They range from fairly simple program-level methods to highly technical and specialized methods. However, all have specialized and technical aspects.
What is meant by cost analysis?
Definition of cost analysis 1 : the act of breaking down a cost summary into its constituents and studying and reporting on each factor. 2 : the comparison of costs (as of standard with actual or for a given period with another) for the purpose of disclosing and reporting on conditions subject to improvement.
What does it mean to have a distribution cost?
Distribution Cost or the Distribution expenses are the costs that a company incurs to make its goods or services available to the end-users or resellers. It is a broad accounting term that covers several types of expenses.
Where do you find distribution costs on a financial statement?
All distribution costs are considered indirect expenses and come under the head of selling and distribution expenses in the company’s profit and loss statement. You may not be able to see it in the face of financial statements, but you surely could see it in the note to financial statements.
How can a company lower its distribution cost?
Use of technology, machines and automating tasks could also help a company lower its distribution costs. Doing a comparative analysis of the demand and how urgently the customer needs will also help. Avoiding the storage of finished products for a longer time also reduces the distribution cost.
How much does a distribution manager make per year?
For example, Company A has sales of $20,000, while the cost of goods sold (COGS) is $10,000. Transportation expenses are $2,000, salary of distribution manager is $2,000. The net profit in this case will be $6,000 ($20,000 Less $10,000 Less $2,000 Less $2,000).