Title: The units of value added to offset the cost calculation shortcomings: an opportunity for small African businesses

Authors: Jean-Guy Degos; Yves Levant

Addresses: IRGO Research Centre, University of Bordeaux, 35, Avenue Abadie, Bordeaux, 33072, France ' SKEMA Business School, LSMRC Lille School of Management Research Centre, University of Lille 2, 2 rue de Mulhouse, BP381, Lille Cedex 59020, France

Abstract: Firms are growing increasingly complex and have to respond very quickly to changes in an unstable environment. Using reliable costing methods, they must be able to clearly identify sources of losses and profit. This requires them to adopt a radical change of perspective, replacing calculation of the margins on products with calculation of the profit on each sale. This type of analysis, facilitated by the UVA costing method, can inform businesses, particularly small and medium enterprises (SMEs), which of their customers are profitable and which generate losses, which of their products and services are not meeting customer demand, which prices are not reflecting the costs borne, which processes must be improved, and so on. Firms can thus make operational and strategic decisions to improve profitability. SMEs in African countries, facing a difficult business context, could usefully take advantage of these systems, which are appropriate for their structures.

Keywords: Africa; profitability curves; cost management; small and medium-sized enterprises; SMEs; cost-price relationship; units of value added; UVA costing; small firms; small businesses.

DOI: 10.1504/AJAAF.2015.075123

African Journal of Accounting, Auditing and Finance, 2015 Vol.4 No.4, pp.312 - 327

Received: 04 Aug 2015
Accepted: 04 Aug 2015
Published online: 03 Mar 2016 *

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