Service
Standard Costing & Variance Analysis
Design and roll standard costs, decompose the variances that follow, and connect operational levers to profit and loss impact, so margin is visible where decisions are made.
In many growing manufacturers, costing was set up once, early, and never revisited as products and operations grew more complex. The result is pricing on gut feel, margins that surprise leadership at quarter end, and variances no one can fully explain. This work rebuilds the costing model so it reflects how the business actually operates, and so margin is visible by product, line, job, or customer.
What this work involves
- Designing and rolling standard costs across materials, labor, and overhead.
- Decomposing variances into their drivers, including purchase price variance, labor efficiency, overhead absorption, and yield.
- Expanding costing detail so margin is visible where decisions are made, by product, line, job, or customer.
- Connecting cost data to the key performance indicators (KPIs) leadership manages by, so the metrics reconcile to the financials.
- Translating operational levers into their profit and loss impact, so the team can see what actually moves margin.
Why costing drifts out of alignment
Standards age. Material costs, labor rates, and process steps change, but the costing model often does not keep up, so the standards no longer reflect reality and variances pile up. Meanwhile costs are frequently tracked at too high a level to reveal which products or customers actually make money. Refreshing the standards and the level of detail brings the numbers back in line with how the business runs.
Signs your costing needs attention
- Pricing decisions rely on estimates or gut feel rather than true cost.
- Margins come in materially different from expectations, and no one can fully explain why.
- Variances accumulate that the team cannot break down or act on.
- Costs are tracked at too high a level to see which products, lines, or customers make money.
How I work
I diagnose the current costing model and where it diverges from reality, design standards and a level of detail that fit the business, validate the results against the financials, and hand off a costing process the team can maintain. Where the work depends on what the system can capture, it connects directly to ERP and systems remediation.
Industry focus
This is core ground for manufacturing and industrial businesses, where cost lives in bills of material, routings, overhead pools, and inventory, and where small costing errors compound into real margin distortion. The work draws on a manufacturing controllership and private-equity operating background.
Common questions
What is standard costing?
Standard costing sets an expected cost for materials, labor, and overhead, then measures actual results against it. It gives you a consistent baseline to price against and to spot where real costs are moving away from plan.
What is variance analysis?
Variance analysis breaks the difference between standard and actual cost into its drivers, such as purchase price variance, labor efficiency, and overhead absorption, so you can see exactly where cost is moving and act on it.
How does costing connect to our KPIs?
The metrics leadership manages by, such as gross margin by product or cost per unit, should be produced from the same cost data in your general ledger. When they are, your dashboard and your financials agree and decisions rest on numbers you can trust.
Do I need to change accounting systems for this?
Not necessarily. Sometimes the standards and detail simply need rebuilding within your current system. Where the system cannot capture the cost detail you need, the costing work pairs with ERP and systems remediation.