Cost allocation is an important process for a business because if costs are misallocated, the business might make wrong decisions to overprice/underpriced a product or invest unnecessary resources in non-profitable products.
To maximize profit, we find every possible way to minimize costs. While some fixed costs are vital to keeping the business running, we always review the financial statements to identify excessive expenses that do not provide any additional value to core business activities. The cost structure of the eHelmetz consists of several contents. The cost structure is not static.
It has been oscillating with the customer demand. The primary costing parameters are as follows.Research & Development cost: The research team is continuously working on to develop the product design and technology implementation in eHelmetz. The R&D cost posses of Industrial Design, Computer-Aided Design and the software development in order to upgrade the product regularly.
The overall R&D cost is 30 percentage of the all cost of the firm.Manufacturing Cost: It include material cost, overhead cost, production cost, labor cost, packing cost, and equipment cost etc. The majority of the cost structure is based on the manufacturing process under continuous quality audits. As per the product line, there are several models of helmets are designed continuously. The material cost and production cost are choose as accordance with product customizedInventory holding cost: The crucial part of the ecommerce business of eHelmtz is depends on the best practice of the Inventory holding cost.
The best strategies are implemented in order to minimize the inventory holding cost.Other costs: There are several costs which enable in the eHelmetz firm like quality assurance, sales force, market research advertising cost, promotion cost, distribution cost etc.