2-7.4 Components of a Should-Cost Analysis

As shown in Figure 2.5, the following cost components are included in a should-cost analysis:

• Sales order processing.
• Inventories (e.g., raw materials, work in process, finished goods).
• Packing⁄assembly.
• Loading.
• Transportation.
• Delivery to customer.
• Other costs (e.g., general and administrative [G&A], customer service charges, training costs).

Figure 2.5

Summary of Should-Cost Model