Case study: on costing systems and cost control

Lorson Manufacturing Company Case Study Executive Summary Lorson Manufacturing Company is actively seeking to implement tighter cost control measures in an industry that is largely governed by prices. The purpose of this report is to present and analyse a new costing system proposed by Mr. Jan Lorson for the valve department of the company, and compare it to the existing system, in order to judge whether to go forward with its implementation. The analysis uses …

…one should go any further than the level of five cost centres identified by Mr. Jan Lorson. At this level, the effort required to collect additional data is not substantial. In order to ensure successful implementation of the new system to achieve the primary company objective of cost control, it is essential that the various departments' incentive plans are in line with the cost reduction and control initiative and the benefits perceived by the implementation.