What is Mission Based Costing?

Mission Based Costing

“Mission” is a set of customer service goals to be achieved by the system within the specific market/product context. A successful achievement of defined mission involves a large input from various activity centres of the firm. Hence the logistics costing should be able to identify the total costs of meeting a desired mission. This is referred as Mission Based Costing.

Essentially Mission Based Costing seeks to identity unique costs that are generated as a result of

specific logistics activities aimed to achieve certain objectives in a specific customer/market. There is no point in incurring additional costs if the additional benefits do not justify the same.

Functional Inputs to Logistical Management

There are four stages in implementing an effective Mission Based Costing.

• Define the customer service segment This is required as all customers do not have the same service requirements
• Identify factors that produce variations in the cost of service: for example – reducing the frequency of delivery .will reduce the costs.
• Identify the specifies specific resources used to support customer segments.
• Attribute activity cost  by customer type or segment.