Young, newly started companies usually are production oriented; do have no management information and no or little market information. During the development process of companies into a mature stage, the focus is directed more and more towards the market.
In the first, production oriented stage, knowing cost prices doesn’t have priority and even is hardly possible. In the market oriented stage of a company, knowing the cost price is a prerequisite to survive! In this stage you need to have records and insight in the performance and results of all departments, insight in the market and its trends, insight in your competitors, etc.
Calculating and actually knowing your cost price:
• gives you insight in your (labor) productivity;
• informs you WHAT to improve in your organisation;
• will prepare you better in negotiations;
• gives you better inputs in your strategy decisions;
• increases your competitiveness (as an individual company and as a group or association);
• will bring you profit more easily.