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An Alternative Approach to Costing

Many companies do not know where they are making or losing money. They know their overall costs and profits made, but can’t see their costs at a more granular and actionable level, or their profitability by product. In today’s complex businesses, massive cross-subsidizations mask the true cost and profit of products, customers, market segments, and activities. As a result, business leaders don’t truly believe the standard cost and profit figures that their accounting or finance departments provide. Square root costing is being embraced by CFOs because it is a practical methodology for correcting the cross-subsidizations that have plagued standard costing.

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