Review the following 10 product-line profitability warning signs and check each item that applies to your business. If you check more than three, further investigation may be warranted. Activity-based costing techniques can shed new light on product profitability.

• Good product cost information is not available
• Corporate overhead and selling expenses aren’t allocated to product lines
• Performance is not measured on a return-on-assets basis by product line
• Profits are stagnating, declining, or failing to grow as fast as sales
• Inventory and capacity are growing faster than sales
• Overhead needs to be cut
• Foreign and other sources of competition are increasing
• Market segments served have matured or are declining
• Government deregulation has changed or may change elements of the basic business
• A variety of new products have been added quickly