Discover | Costing | Introduction


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In the costing module, we will review:

1. The definitions of costing variables
2. Understand how to fill in a costing worksheet for your product
3. Develop a costing framework to evaluate develop, commercialize and launch a product



What is a Costing process?


Most innovations result from a conscious, purposeful search for new opportunities. Peter Drucker, best-selling author and management guru, has noted that because innovation is both conceptual and perceptual, would-be innovators must go out and look, ask and listen.


An important part of the innovation process is the costing of an innovation initiative. Successful innovators look at figures. They look at people. They analytically work out what the innovation has to be to satisfy the opportunity. Then they go out and look at potential product users to study their expectations, values, and needs. A well-defined cost-estimating process to forecast resource requirements and for developing and fielding innovation is critical for the success of an initiative.


TIP: Understanding these costs is the first step in being able to control them.


Why is it important?

Costing is an important process that many companies engage in to keep track of where their money is being spent in the development, production and distribution processes. Understanding these costs is the first step in being able to control them. It is very important that a company chooses the appropriate type of costing system for their product type and industry. One type of costing system that is used in certain industries is process costing.  In process costing, unit costs are more like averages and so the process-costing system requires less bookkeeping than a job-order costing system. This is one reason why some companies prefer to use the process-costing system.