The typical use of accounting cost methods, often misinforms, and usually leads
us into poor decisions. We've reasoned that by pushing our product mix toward those
items having a greater "margin" that we'll realize a greater overall profit. Unfortunately,
this approach doesn't really work. It assumes too much.
We normally update our cost information on an annual or long term basis, so it doesn't
reflect changes in market prices. Since costs are expressed on a per unit basis,
they fail to recognize the impact that product mix has on the supply mix. Rather,
they assume that meat can always be supplied at the same cost for any level of product
Cost also fails to deal with our manufacturing constraints. Since many products
share common manufacturing lines, there is a physical limit as to how much can be
produced. Consequently, it is erroneous to assume that volume doesn't matter and
that cost will always be the same. Of course no one expects that this is true, but
we've relied on cost because there hasn't been anything better.
We develop systems that stay current with market prices, and values products from
the standpoint that each must compete for limited meat materials and plant resources.