Variance decomposition, the allocation test, interim against an empty seat, and a two-minute self-check.
Open the toolsThe cost driver moved to the machine. The allocation basis did not.
See the allocation test/ thee-AH-kree-see / · from the ancient διάκρισις
The Greek word for discernment — the act of telling things apart and judging them correctly.
Diakrisi Corporation is a finance and accounting management consulting firm — interim controller, director of finance and CFO services included — with subject matter expertise in manufacturing process and accounting. Every engagement comes down to the same act: separating what the plant is actually doing from the noise the accounting adds to it.
Two hundred cost items, one variance account. Drag to tell them apart.
Eighteen months of one work center against a standard of $35.02 that never changed. The gap never announced itself; it arrived a few cents at a time and settled into the variance account.
Drag across the chart, or use the arrow keys, to read a period.
Most conversations begin in one of these three places. None of them requires a commitment to the other two.
Interim controller, director of finance or CFO, on site within weeks and billed weekly, with a documented handover to your permanent hire.
Interim leadershipA two-week diagnostic that decomposes the variance, names every cause and prices the remediation before anyone proposes a fix.
Run the modelsClose, reporting, planning, controls and systems, redesigned so your team can run them — with the cost model underneath it corrected first.
What we doFinance and accounting consulting across the whole function, built on manufacturing. Engage us for all of it, or for the one area holding the rest back.
We advise on, redesign and lead every part of the finance function. Engage us for the whole of it, or for the one area that is holding the rest back.
The complete list of activities is in the services index below. We are consultants, not your auditors, and we do not file income tax returns. Those belong with your CPA firm; our work leaves them a clean, documented set of books and policies to work from.
Every customary finance and accounting activity, in the groups a finance function is usually organized by. We assess, redesign, lead or perform any of them — and in a manufacturer, the cost and manufacturing group is where the rest either holds together or does not.
Nothing matches that. If it sits in a finance function, it is in scope — ask us.
Our subject matter expertise, in two halves that most firms keep apart: the manufacturing process and the accounting for it. These eight engagements draw on both, and they are the reason most clients call. Each stands alone or sits inside a broader finance engagement.
A structured review of standards, routings, bills of material, rate build and absorption logic against what the plant is physically doing. We quantify the gap and rank the causes by dollars.
Findings memo, quantified variance bridge, prioritized remediation plan.
New rates, new routings, new cost component structure — built on machine capacity and yield rather than inherited labor hours, with the roll documented so it repeats without us.
Rebuilt standards, roll procedure, revaluation impact analysis.
Price, usage, rate, efficiency, mix and volume separated cleanly and tied to the ledger, so the monthly meeting is about causes and owners instead of about whether the report is right.
Reconciled COGM model, variance pack, close calendar.
Costing configuration in SAP S/4HANA, Oracle, Epicor, Dynamics 365 and NetSuite, and the Hyperion planning and consolidation layer above them: cost component splits, activity types, order settlement and material ledger decisions.
Design document, configuration review, test scripts, cutover support.
Absorption and capitalized variance policy, excess and obsolete methodology, count design and cycle count governance, with the documentation your auditors ask for before they ask.
Valuation policy, reserve model, audit support file.
What the next machine actually earns. Constraint-aware cost of capacity, make-or-buy, insource analysis and post-installation verification against the case that justified the spend.
Capacity cost model, capital case review, post-audit template.
We walk the value stream the way an engineer does — cycle times, yield, changeover, OEE, WIP and scrap points — and trace each one to where it lands in the ledger. The result shows operations and finance the same process in the same numbers.
Process cost map, driver linkage, operations–finance KPI set.
Raw, WIP and finished goods traced through the process so working capital, obsolescence risk and the sales and operations plan are measured in the same units finance reports in.
Inventory flow model, S&OP financial layer, working capital targets.
Built from the structure of work we have done, not from any single client. Names, numbers and sectors are illustrative.
Every engagement leaves artifacts your team keeps using after we go. These are the ones that come up most often.
What the standard says, what the plant did, and the dollar bridge between them, ranked by cause.
Price, usage, rate, efficiency, mix and volume separated and tied to the ledger, rebuilt each month from source data.
Rates, routings and cost component structure, with the roll written down step by step so it repeats without us.
Cost component splits, activity types, settlement and material ledger decisions, with test scripts and a cutover checklist.
Methodology, source data, reconciliations and the memo explaining each judgment, written when the decision was made.
The calendar, the owners, the open risks and the reasoning behind every policy, so the next person inherits a function.
Controller, director of finance or CFO. We take the role and run it as the owner would, billed weekly, and hand back a documented function.
Plant or corporate. Owns the books. $165 an hour
Typical call: a controller has left, a plant is starting up, or the close has stopped finishing on time.
Site, division or business unit. Owns the numbers and the plan. $200 an hour
Typical call: a division has grown past its reporting, or operations and finance no longer agree on the same number.
Company level. Owns cash, capital and the relationships. $250 an hour
Typical call: a CFO departure, a lender or ownership event, or a company that needs CFO judgment before it can justify a full-time CFO.
Full time on site for a defined period, part time on a fixed weekly cadence, or fractional over a longer horizon. All of them are invoiced weekly, so the cost tracks the work rather than running ahead of it. Each arrangement carries the same accountability: we sign off on the close, present the numbers, and answer for them.
Every interim engagement ends in a documented handover — the close calendar, the open issues, the policies and the reasoning behind them — so the permanent hire inherits a function rather than a backlog. Where it helps, we support the search and interview for the role we are holding.
Short, sequenced, and built to end. An engagement that cannot be handed back to your team has failed, however good the model is.
On site. We walk the process, pull the cost estimates and the last four closes, and measure the standard against the actual route the product takes.
2 weeksWe rebuild the variance from source data and name every piece of it. You see the bridge before anyone proposes a fix.
2 to 3 weeksNew standards and cost structure, modeled and revalued so the balance sheet impact is known before it is posted, not discovered at close.
4 to 8 weeksConfiguration in your ERP, the reporting pack in your close calendar, and your controller running it for a cycle with us alongside.
One close cycleThe two-week calibration and the findings memo, scoped and priced before it starts. It stands alone and commits you to nothing further.
Fixed fee from $12,000, invoiced weeklyA rebuild, an ERP costing design, or a valuation and reserve overhaul, with a defined deliverable and an end date.
Fixed fee by phase, invoiced weeklyController, director of finance or CFO — full time for a defined period, or part time on a fixed weekly cadence.
Billed weekly, from $165 an hourA fixed block of hours each month for the close, the forecast, and the questions that come up between them.
From $1,250 a weekPublished, so the first conversation can be about the work. Every engagement is quoted in writing before it starts.
All engagements are invoiced weekly, against time recorded or against the phase drawn that week. Travel and on-site expenses are billed at cost. Weekly figures are illustrative at the hourly rate shown; the quoted arrangement governs.
Four working models, not brochureware. Move the inputs and disagree with them; all figures are illustrative composites.
One work center, one month. The standard holds still while the plant moves. The shaded band is a two percent tolerance on standard unit cost.
Move any input and watch which account absorbs it.
The standard is unchanged. Only the plant moved.
Five inputs, and only one of them is a purchasing decision. The other four are physical facts about the line that the cost system was never configured to see.
Notice what happens when volume falls. Nothing on the floor got worse, but unit cost rises, because fixed overhead has fewer units to land on. That number will be reported as a manufacturing problem in the operations review, and it is not one.
Notice also that yield loss and cycle time move the cost more than material price does, on a part where material is the largest single component. That is the reason a purchasing-led cost reduction program so often fails to show up in the margin.
This is the level at which we work: the decomposition, the causes behind it, and the reporting that puts each one in front of the person who can change it.
Two products, one overhead pool, three defensible ways to spread it. Nothing about the plant changes between them — only the basis. Watch which product you would have cut.
$680,000 of annual conversion overhead spread across a low-volume precision part and a high-volume commodity part. Selling prices and physical consumption are identical in all three views.
A vacancy is never free. Set your own numbers and see what the gap between the two really is over the months it takes to hire.
Weeks to hire, the salary you are replacing, and the interim arrangement you would run in the meantime.
The comparison people usually make is the interim hourly rate against the hourly equivalent of a salary. That comparison is wrong twice over.
It omits what the employer actually pays — benefits, payroll taxes, insurance and the search fee — and it assumes the seat is filled today. It is not. The months before a hire starts are the expensive part, and the cost lands on the close, the forecast and the audit file rather than on the payroll line where anyone can see it.
It also ignores exit. An interim engagement ends on a date with a handover attached and no severance. A wrong permanent hire in a finance leadership seat costs the search twice and a year of reporting you cannot rely on.
Weekly billing means you only ever fund the coverage you have used. If the hire starts early, the engagement stops that week.
Eight statements. Tick the ones that are true of your plant this year, not the ones that were true when the system went in.
Tick what applies. The count is not a grade — it maps to which of the eight service lines is worth starting with.
The failure mode is the same everywhere. What drives it is not. These are the cost structures we work in and where each one breaks.
Yield is the cost driver and test is the gate, but the standard treats scrapped die and reworked boards as usage noise. Cost of a wafer start and cost of a good unit drift apart until nobody quotes from the same model.
Yield-adjusted standards, test cost poolingLot control, sterilization cycles and validated rework carry real cost that rarely reaches the routing. Regulated scrap gets buried in overhead, and the margin on a low-volume SKU is a guess.
Lot-level cost, validated rework routingDry room conditioning, formation and aging consume capacity and energy for days per lot. When absorption is keyed to touch time, formation looks free and the scrap from a failed cell is charged to the wrong period.
Energy and dwell-time absorptionBasis weight, broke recycling, grade changes and converting loss all move unit cost, and standards built on tons produced hide every one of them. Trim and broke are the two most commonly mis-costed streams in the industry.
Broke valuation, grade-change costConfigure-to-order builds, burn-in, and integration labor sit outside the standard for a base model. Margin by configuration is unknown at the moment of quoting, which is exactly when it matters.
Configuration-level costing, burn-in capacitySetup and changeover dominate low-volume work and are almost never charged to the lot that caused them. Short runs subsidize long ones, quoting rewards the wrong orders, and the schedule fills with them.
Setup cost pools, lot-size economicsPositions we have argued in front of plant leadership, audit committees and ERP steering groups.
Direct labor is under ten percent of conversion cost in most modern plants, and still carries the whole overhead allocation.
The allocation basis was chosen when labor paced the line. It has survived three generations of automation because nobody owns it and because changing it restates inventory. Meanwhile the cost driver has moved to machine availability, yield and changeover.
The consequence is not a reporting inconvenience. Products that consume little labor and heavy machine time look cheap; short-run, setup-intensive work is subsidized by the long-run work that appears unprofitable. Pricing, capital and product-line decisions then run in that direction for years, carrying the authority of the general ledger.
The fix is not activity-based costing as a parallel exercise. It is a rebuilt rate structure inside the ERP, with capacity, setup and yield as drivers, modeled and revalued before it is posted.
The migration is treated as a technical event. The costing design is inherited from a system that was already wrong.
Conversion projects are scoped around data, interfaces and cutover. The cost component structure, activity types, overhead keys and material ledger decisions are carried across as configuration, not re-examined as accounting. A defective cost model is then reproduced at speed, in a system nobody wants to touch for three years afterward.
The window to fix the standard is the blueprint, not the stabilization phase. A costing design review before configuration freeze costs a fraction of a post-go-live remediation and avoids a second inventory revaluation.
The clock matters too. The pressure to leave legacy ECC has every manufacturer chasing the same scarce migration capacity, which is exactly when costing design gets deferred.
Volume falls, unit cost rises, and the operations review blames the floor for a variance the plan created.
Fixed overhead absorbed on planned volume means every short month produces an unfavorable variance without a single process failing. Reported as one number, it reads as poor performance and provokes the wrong corrective action.
Separating volume variance from the controllable variances is a reporting design decision, not a technical accounting one. When the pack shows them apart, the discussion moves to the sales and operations plan, where the cause actually sits.
The same discipline is what makes a variance pack usable in an audit. Causes with owners survive scrutiny. A single manufacturing variance account does not.
An accurate physical count on a defective standard produces an accurate valuation of the wrong number.
Count accuracy gets the attention because it is visible and auditable. Valuation accuracy does not, because it depends on standards, routings and capitalized variance policy that few people outside finance can interrogate.
Where the standard understates yield loss or carries a stale rate, the balance sheet holds value that the process never created, and it releases into margin at the worst possible time. Where it overstates them, the company writes down inventory it should have carried.
Reserve methodology deserves the same treatment: documented, tested against actual consumption, and set before the auditors ask rather than negotiated afterward.
A finance seat left open for six months costs more than the interim who could have held it, and the cost never appears on the payroll line.
Vacancy cost is invisible because it is distributed. The close slips a few days, reconciliations age, the forecast is produced by someone doing it as a second job, and the audit file is assembled in a rush in March.
None of that is booked anywhere. What gets booked is the salary saved, which makes the vacancy look like an underrun rather than an exposure.
The honest comparison is coverage against no coverage over the weeks it actually takes to hire, with the search fee and employer load included on the permanent side. Run that arithmetic before deciding an interim is expensive.
Day ten is not a scheduling problem. It is a reconciliation problem wearing a calendar.
Closes run long for a small number of reasons: accounts that are reconciled at close rather than during the month, accruals estimated from memory, intercompany that nobody owns, and a cost roll that produces numbers finance cannot explain to operations.
Adding people shortens it for one month. Moving the work into the month shortens it permanently, because the close stops being the place where the ledger is investigated and becomes the place where it is reported.
The measure that matters is not the day the books close. It is the day the numbers stop changing.
Capital cases are built with care and verified almost never.
Every capital request carries a payback, a throughput assumption and a cost per unit. After installation, the plant reports production and the finance function reports absorption, and nobody compares either back to the case that released the money.
The discipline is a post-audit at a fixed interval — twelve months is usual — against the original case, with the variances named. It costs a day of work and it changes how the next case is written, because the author knows it will be checked.
Where the case cannot be verified from the cost system, that is itself the finding. It means the cost model cannot see the asset it just financed.
Support assembled in the spring for a decision made in August is reconstruction, and it reads like it.
Auditors test judgments: reserve methodology, capitalized variance, standard cost changes, obsolescence. Each of those is a decision taken on a specific day for a reason that was clear at the time and is not clear eight months later.
A short memo written when the decision is made — the method, the data, the rationale, the approver — converts a negotiation into a review. It also protects the controller who made the call, who may not be the person defending it.
The same file answers the lender, the insurer and the buyer in a diligence process. It is written once and used four times.
Anyone can tell you the variance. The work is telling you which part of it your plant can do something about — and which part your plan created.
The standing argument of the practice
Why the firm exists, who does the work, the implementation record, and the questions that come up on every first call.
Standard costing was designed for a labor-paced factory. Most modern plants are not one, and the accounting has not been re-cut to fit.
In a modern plant the cost driver is machine availability, yield, changeover and energy — not direct hours. Labor is often under eight percent of conversion cost and still carries the entire overhead allocation, because that is how the system was configured when it went in.
The result is not a reporting inconvenience. It is a decision system that points the wrong way, quietly, for years, while every report it produces carries the authority of the general ledger.
Diakrisi Corporation does that work. We are not a systems integrator and we do not sell software. We are finance and accounting consultants who have run the close in plants like yours, and the deliverable is a finance function your team can operate after we leave.
Our consulting covers the full finance and accounting discipline — close, reporting, planning, controls, systems and finance leadership. What sets the work apart is that we understand the manufacturing process underneath the numbers: routings, yield, changeover, capacity and inventory flow. In a manufacturer, the hardest numbers in the ledger are the ones the process produces, and those are the ones we know best.
Rates are refreshed once a year in a spreadsheet one person understands, and the routing quantities behind them were last verified at commissioning. The variance is real money in an account nobody can decompose, so it gets explained as timing.
Margin looks healthy on the mix that starves the bottleneck and thin on the mix that feeds it. Pricing, capital and product decisions run in that direction until someone measures the constraint instead of the labor hour.
S/4HANA, Dynamics, Epicor and NetSuite will all cost a product correctly. They will also reproduce a bad cost architecture at speed, in every report, with a system of record behind it.
Diakrisi is a practice, not an agency. The person who scopes the work is the person who does it.
Jeffrey D. Retherford has spent more than thirty years in plant and corporate controllership and CFO-level finance leadership — in tissue and paper, building products, biomass energy, dental and ophthalmic devices, and federal manufacturing, including service at the U.S. Mint and the Bureau of Engraving and Printing.
That means closes actually run, standards actually rolled, counts actually reconciled, and ten ERP and EPM implementations carried from blueprint through cutover and stabilization — not advice assembled from a methodology deck.
The research is on the same problem. His doctoral work at Capella University examines how standard costing holds up inside digitally instrumented manufacturing environments, where the shop floor generates more usable cost data in an hour than the monthly close consumes in total. That question is the reason this firm exists, and the answer keeps being that the data is already there and the cost model cannot see it.
The practice covers the full finance and accounting discipline. Manufacturing is the subject matter it is known for — the process as well as the accounting — and it is what makes the rest of the work accurate: in a plant, the ledger is only as good as the understanding of the process feeding it.
Engagements are held to a small number at a time. If the calendar cannot support the work, we say so at the scoping call rather than staffing around it.
Finance-side design and cutover on the transactional systems, and the consolidation and planning layer above them. Federal and commercial, single site and multi-entity.
The ones that come up on every first call.
No. We are a finance and accounting consulting firm first — close, reporting, planning, controls, systems and interim leadership. Manufacturing process and accounting is our subject matter expertise, and it tends to be where the most expensive problems in a manufacturer's finance function sit, but engagements regularly cover the whole function.
The role, in full. An interim controller signs off the close; an interim director of finance owns the plan and the operating reviews; an interim CFO manages cash, lenders and the board. We report to whoever the permanent role would report to and carry the same authority for the length of the engagement.
What we do not do is hold the seat passively. Every interim engagement produces a written assessment in the first month and a documented handover at the end.
No, and we would not want to. Independence matters: the party that shapes the books should not be the party that audits them. We design the processes, fix the records and build the support file; your CPA firm audits and files against it. The better our work is, the shorter their engagement gets.
No. We design and verify the costing layer inside whichever system you have or are implementing, and we work alongside your integrator. That separation is deliberate: the party that configures the system should not also be the party that certifies the numbers coming out of it.
Usually yes, and the size of it is knowable in advance. We model the revaluation before anything is posted, so the balance sheet impact and the P&L timing are a decision your CFO makes with a number in front of them, not a surprise at close.
We build the support file as we go — methodology, source data, reconciliations, policy memos — in the form audit actually asks for. Where a change in standards or reserve method is material, we document the rationale at the time of the change rather than reconstructing it in the spring.
It is the normal starting condition. Missing routings, stale cycle times and unreconciled scrap are findings, not blockers — the diagnostic reports the data quality gap as a quantified item alongside everything else.
The calibration phase is on site, because standards cannot be verified from a data extract. The rebuild and modeling work is largely remote, with return visits for validation and for the handover close.
We sign your agreement, not ours, and we do not name clients in marketing material. All published examples on this site are composites built from public industry structure.
Nothing. It is a scoping call, and it ends either with a written scope and fee — built from the published rates — or with a straight answer that the work is not ours to do.
Tell us what the last close looked like and where you think the number is wrong. The first conversation is not a pitch.
4005 Washington Rd, Ste 11, Ubly, MI 48475. Engagements run on site with remote work between visits.
Those three documents are usually enough to say something specific within a week, and to price a diagnostic without a discovery phase.
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Everything here describes services in general terms. Nothing on this site is an audit opinion, an accounting opinion, legal advice or tax advice, and nothing on it creates a client relationship; that begins with a signed engagement letter and not before.
The interactive models are illustrative composites built from public industry structure. They are not any client's data and not a forecast of your results. Rates shown are current starting rates and may change; the written quotation for your engagement governs.
Diakrisi Corporation provides consulting and interim management services. It does not perform audits, issue assurance reports or file income tax returns. The text, models, code and marks on this site belong to Diakrisi Corporation.
Send the variance pack and the last cost roll. Within a week you will have a specific answer about where the number is wrong, and a written scope if the work is ours to do.
