Brian O'Kane

  In the ever-evolving world of business finance, understanding how to measure and allocate costs can be the difference between steady growth and stalled profitability. Two primary approaches dominate the conversation: activity-based costing (ABC) and traditional costing. Both methods have their advantages and limitations, and choosing the right one depends on your industry, company size, and long-term goals. Whether you’re a small manufacturer or a growing service provider, the ability to select and implement the right costing system can shape more innovative strategies and healthier bottom lines. Understanding the Basics of Cost Allocation At its core, cost allocation is about clarity — knowing where your money is going so you can make informed decisions. Traditional costing spreads overhead costs evenly, typically using a single factor, such as machine hours or labor hours, to assign expenses. While straightforward, this method often oversimplifies the reality of complex operat...

  Every major business decision carries with it a blend of opportunity and risk. Companies often face the challenge of committing resources to projects without knowing how external conditions may shift. Financial modeling bridges this gap by serving as a compass, guiding organizations through the uncertainty of strategic planning. Far from being a routine financial exercise, it has become a cornerstone of how companies evaluate choices, anticipate risks, and align their vision with measurable outcomes. A Foundation for Evidence-Based Decisions The strength of financial modeling lies in its ability to transform assumptions into structured analysis. Leaders can take raw data—ranging from sales forecasts to macroeconomic trends—and translate it into projections that reveal potential future states of the business. This allows decision-makers to move beyond gut instinct and base their strategies on evidence. For instance, a company considering launching a new product line can build mo...

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...