An Application of Distribution Cost Analysis to a Small Company.

Abstract The emergence of a marketing oriented management during the post-war era has created a need for a change in the basic philosophy of accounting. Management must be aided by the accountant through the interpretation of quantitative internal data which will enable management to make effective decisions. Pricing, product planning, and other forms of sales analysis are greatly benefited through the establishment of a system which effectively controls and analyzes distribution costs. Distribution cost analysis represents a challenge to the accounting profession which must develop accounting systems and techniques that will meet the needs of business. The sophistication of management has improved and accounting must reflect the dynamics of change. The article presents a case study on the Hypothetical Paint Spray Company, which manufactures a single-unit paint spray machine for industrial use. This company is a wholly fictitious entity which has been used to illustrate the application of a simplified system of distribution cost analysis to a small sized organization.