Advanced Composites: Strategic Cost Accounting Transformation
How implementing a sophisticated activity-based cost accounting system helped an aerospace composites manufacturer improve cost accuracy by 40% and win $12M in new contracts through strategic pricing.
Executive Summary
Advanced Composites Manufacturing, a specialized aerospace components manufacturer, partnered with Schapira CPAs to implement a comprehensive activity-based cost accounting system. This transformation improved cost accuracy by 40%, enabled strategic pricing decisions that won $12M in new aerospace contracts, and increased overall margins by 25% through better cost visibility and control.
Client Profile
Advanced Composites Manufacturing
Aerospace & Defense Composites Specialist
Company Details
Core Capabilities
- Carbon fiber composite manufacturing
- Aerospace structural components
- Defense applications & prototyping
- AS9100 certified quality systems
Advanced Composites Manufacturing specializes in high-performance carbon fiber and advanced composite components for aerospace and defense applications. With complex manufacturing processes and stringent quality requirements, accurate cost accounting was critical for competitive bidding and profitability management in the highly regulated aerospace industry.
The Challenge
Critical Cost Accounting Deficiencies
Despite strong technical capabilities and growing demand, Advanced Composites was struggling with inaccurate cost information that threatened their competitiveness and profitability in the demanding aerospace market.
Inaccurate Product Costing
Traditional overhead allocation methods failed to capture the true cost of complex composite manufacturing processes, leading to pricing errors and margin erosion.
Limited Cost Visibility
Lack of detailed cost tracking by process, material type, and quality requirements made it difficult to identify improvement opportunities and optimize operations.
Competitive Bidding Challenges
Inability to accurately price complex aerospace contracts resulted in lost bids and unprofitable projects that eroded overall company performance.
Compliance & Reporting Issues
Aerospace contract requirements for detailed cost reporting and government audits demanded more sophisticated cost accounting capabilities.
Our Comprehensive Solution
Activity-Based Cost Accounting Implementation
Schapira CPAs designed and implemented a sophisticated activity-based cost accounting system tailored to the unique requirements of aerospace composites manufacturing, providing unprecedented cost visibility and accuracy.
Phase 1: Process Analysis & Cost Driver Identification
Manufacturing Process Mapping
- Detailed analysis of composite manufacturing workflows
- Identification of cost drivers and activity centers
- Resource consumption pattern analysis
Cost Structure Assessment
- Material cost tracking by composite type
- Labor allocation by skill level and process
- Equipment utilization and overhead analysis
Phase 2: System Design & Implementation
Activity Centers
15 distinct cost centers aligned with manufacturing processes
Cost Drivers
25+ cost drivers for accurate allocation
Product Costing
Real-time product cost calculation
Phase 3: Integration & Optimization
Technology Integration
- ERP system integration with cost accounting modules
- Automated data collection and cost allocation
- Real-time reporting and analytics dashboards
Process Optimization
- Continuous improvement identification
- Variance analysis and corrective actions
- Strategic pricing model development
Outstanding Results
Transformational Cost Management Success
The activity-based cost accounting implementation delivered exceptional results, providing Advanced Composites with the cost visibility and accuracy needed to compete effectively in the demanding aerospace market.
Additional Business Impact
Operational Improvements
- Reduced material waste by 18% through better tracking
- Improved equipment utilization by 22%
- Enhanced quality control cost management
Strategic Benefits
- Enhanced competitive positioning in aerospace market
- Improved government contract compliance
- Data-driven decision making capabilities
"The cost accounting transformation Schapira CPAs delivered was a game-changer for our business. For the first time, we have complete visibility into our true manufacturing costs at every level. This has enabled us to price our aerospace contracts strategically and win business we previously couldn't compete for. The 40% improvement in cost accuracy has directly translated to better margins and more confident bidding on complex projects."
Key Takeaways
For Complex Manufacturers
- Activity-based costing provides superior accuracy for complex processes
- Detailed cost visibility enables strategic pricing decisions
- Proper cost allocation improves competitive positioning
Implementation Success Factors
- Thorough process analysis and cost driver identification
- Technology integration for automated data collection
- Continuous monitoring and system optimization
Project Summary
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