Brian O'Kane

Costing systems play a critical role in how businesses measure expenses, allocate resources, and set prices. Two of the most commonly used approaches are Activity-Based Costing (ABC) and Traditional Costing. While both serve the purpose of assigning costs to products or services, they differ significantly in methodology and accuracy. Understanding these differences is essential for managers who want to improve profitability and efficiency. Understanding Traditional Costing Traditional costing is the older and more straightforward approach. It typically assigns overhead costs based on a single cost driver, such as direct labor hours or machine hours. The assumption is that production volume is the main factor driving costs. For example, if one product requires twice as many labor hours as another, it will absorb twice as much overhead. This system works well in industries where overhead is relatively small, and production processes are uniform. However, in modern business environment...

Why Budgeting Alone Isn’t Enough Creating a budget is a crucial step for any organization aiming to manage its finances, but it’s only the beginning. A budget sets expectations—it estimates how much a business will earn and spend over a period. Yet, what really determines whether those financial goals are met is how well the organization tracks , analyzes, and responds to actual spending. That’s where cost accounting becomes a game-changer. Budgeting provides the “what,” but cost accounting supplies the “why” and “how.” It translates raw spending into meaningful insights, ensuring that financial planning is not just aspirational but executable. Most businesses run into the same challenge: unexpected expenses, underestimated project costs, or departments that consistently overspend. Without a system to monitor these deviations and reveal their sources, organizations risk financial inefficiency or worse—operational instability. Budgeting sets the rails; cost accounting ensures you don’t ...

E-commerce has become an integral part of the global economy , offering businesses vast opportunities for expansion. However, one of the significant hurdles in the industry is efficiently managing costs. Cost accounting for e-commerce businesses presents unique challenges due to the complexity of digital transactions, inventory management, and varied pricing strategies. In this article, we will examine the primary difficulties that e-commerce businesses face in cost accounting and provide practical solutions for addressing them. Understanding Complex Inventory Management Managing inventory is one of the primary challenges in e-commerce cost accounting. Unlike traditional brick-and-mortar stores, e-commerce businesses often rely on a mix of warehouses, third-party fulfillment centers, and dropshipping models. This complexity leads to difficulty in accurately tracking inventory, which can result in overstocking, understocking, or mispricing products. To address this issue, e-commerce bus...