How can cost accounting help the gaming industry improve performance?

1 Cost drivers and allocation

One of the main tasks of cost accounting is to identify the cost drivers and allocation methods for each activity or process involved in creating a game. Cost drivers are the factors that influence the amount of resources consumed, such as the number of hours, units, or transactions. Allocation methods are the rules or formulas that assign costs to different products, departments, or customers. By using cost drivers and allocation methods, the gaming industry can better understand how their costs are distributed and how they affect their profitability.

2 Cost behavior and estimation

Another important aspect of cost accounting is to understand the cost behavior and estimation of different types of costs. Cost behavior refers to how costs change in response to changes in the level of activity, such as fixed, variable, or mixed costs. Cost estimation refers to the techniques and methods used to predict the future costs based on historical data, trends, or assumptions. By using cost behavior and estimation, the gaming industry can plan and budget their costs more accurately and efficiently.

3 Cost-volume-profit analysis

A useful tool for cost accounting is the cost-volume-profit analysis, which examines the relationship between the costs, sales volume, and profit of a game or a portfolio of games. Cost-volume-profit analysis can help the gaming industry answer questions such as: How many units of a game need to be sold to break even or to achieve a target profit? How will changes in the price, costs, or market share affect the profit margin? How can the product mix be optimized to maximize the overall profit?

4 Cost control and reduction

A key objective of cost accounting is to help the gaming industry control and reduce their costs without compromising the quality or value of their games. Cost control and reduction can be achieved by using various strategies, such as: Benchmarking and comparing costs with competitors or industry standards. Implementing lean or agile methods to eliminate waste and improve efficiency. Outsourcing or automating non-core activities or functions. Negotiating better deals with suppliers or distributors. Innovating or redesigning processes or products to lower costs or increase value.

5 Cost-benefit analysis and decision making

A final benefit of cost accounting is to assist the gaming industry in making informed and rational decisions based on the cost-benefit analysis of different alternatives or scenarios. Cost-benefit analysis is a method of evaluating the advantages and disadvantages of a decision by comparing the costs and benefits of each option. By using cost-benefit analysis, the gaming industry can weigh the trade-offs and choose the best course of action that maximizes their value and minimizes their risks.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?