CIMA P1 Syllabus A. Cost Accounting For Decision And Control - Costing Digital Products - Notes ^{7 / 7}

Features of digital costing

• It is vital to have the most up-to-date pricing information available and therefore links to supplier IT systems are crucial.

• Information is gathered in real time

• Large volumes of data are processed

Particular Issues Include:

1. High Fixed Costs

   Digital products often need huge research and development. 

   With no guarantee of success and things moving so quickly these often have to be written off

2. Low Variable Costs

   The cost of a new student accessing acowtancy is v small 
   The cost of a new listener to a song online is v v v small
   The cost of a new reader to an e-book is v v v small

3. Ongoing Development Costs are high

   New software updates and competition mean development costs are continually high - either that or face obsolescence!

4. Security/Compliance costs are high 

   Hackers are a continual problem as are viruses

   There is also the issue of data protection regulations

5. Evolving Revenue Streams

   Buy access to the software for a period of time
   Buy access to the software monthly or annually
   Buy access as a one-off (until a new version requires a new purchase)

The big issue is accounting for these digital costs correctly - when and where in the accounts