Profitability Improvement Through Cost Analysis

Intro

Profit margins often shrink silently due to unnoticed inefficiencies. This case highlights how detailed cost analysis helped a client improve pricing, reduce overheads, and increase profitability.

Client Background

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The client provides technical maintenance and project-based services across Oman. Although revenue was rising, profitability continued to decline.

Challenges

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• No visibility into cost drivers
• Unprofitable service lines
• Inefficient allocation of overheads
• Manual tracking leading to inaccurate job costing

Solution

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1. Cost Mapping

• Identified direct, indirect, and hidden costs
• Analyzed each service line’s performance

2. Cost Allocation Model

• Implemented activity-based costing
• Allocated overheads accurately across projects

3. Pricing & Operational Improvements

• Adjusted pricing for underperforming services
• Identified operational inefficiencies

4. Tools & Dashboards

• Introduced profitability dashboards
• Trained staff on cost monitoring

Within six months, margins increased and decision-making became data-driven.