Question

You are the accountant for the Best Outdoor Living company which manufactures various outdoor furniture. The furniture is sold by specialty stores and through internet outlets. You are responsible for reviewing costs and creating standards costs based on the information you have reviewed.

One of your former colleagues has recently started a company to collect and sell data on industry benchmarks. You are offered the chance to receive benchmarks from other outdoor furniture companies for free if you will provide the standard and actual costs for the last three years of your company. As creation of the standards is a tedious process, you feel this data would be helpful in your job.

What are the relevant factors in this situation and how you should handle this, and what you would recommend to the Controller

Answer 1

Factors needed to be consider in sharing internal cost data of a company:-

As we know that Costing strategy of a company is a Private matter it cannot be disclosed in public, because cost of a product is a major part of every business, Product cost include direct labor, direct materials, consumable production supplies, and factory overhead.

if we disclose our product cost strategy the we may face financial losses , As our competitor company come to know about our core information and they are able to evaluate our product in every aspect, they come to know about:-

1. Our Pricing Strategy

2. Our Profit Margin

3.Our Business Methods

4. Our Use of IT and Innovation in the business

So as a Loyal employee of compay i do not disclose the standard and actual cost of my company even if i get the benchmarks of other companies free of cost because if i disclose it then it will going to have huge impact on our business.

So I will recommend Not to disclose such type of Sensible Information