What Is Contribution Illusion in Manufacturing Cost Systems?
Contribution illusion occurs when a product, customer, or division appears profitable under existing cost allocation mechanics but becomes significantly less profitable once overhead drivers are aligned with actual operational behavior. This distortion typically develops when overhead allocation methods fail to reflect how production resources are truly consumed. The accounting system continues producing accurate financial statements, […]
The True Cost of “Close Enough” Inventory Counts
When inventory accuracy is optional, the damage shows up everywhere — margins, borrowing base, year-end surprises.