ABSTRACT
Big data analytics are changing product costing practice in its decision-facilitating role, and have made arbitrary overhead allocation unnecessary. Contracts-to-system applications, which extract cost data directly from contracts without resorting to conventional cost accounting, are key components of emerging practice, and are currently offered by all Big 4 accounting firms to audit and consulting clients. I call this practice contract-based cost analytics (CBCA) and illustrate it with a special order decision scenario. Benefits of CBCA are reductions in cost estimation assumptions, timeliness, intuitive appeal to non-accountants, improved access to unstructured data, improved negotiations regarding cost and sales, outsource-based budgeting, and support for capital budgeting decisions (in addition to short-term scenarios). The biggest obstacle to CBCA is accountants' familiarity with linear cost behavior assumptions.
