The article considers the possibility of applying the methodology of functional-cost analysis to the study of the processes of production of railway sleepers from modified wood. It has been established that coniferous wood is currently in short supply. Therefore, it is proposed to produce railway sleepers from soft hardwood, a lack of which in Russia does not exist. Sleepers made from innovative hardwood modified according to innovative technology are not inferior in performance to sleepers from natural coniferous wood. However, the production of railway sleepers from modified hardwood is expensive. Functional-cost analysis allowed optimization of costs for the production of innovative products. Functional-cost analysis allowed us to determine the contribution to the production of railway sleepers from modified wood of each function. It is proved that the greatest contribution to the formation of production costs is made by the costs of monitoring the parameters of the installation during the warm-up cycle. The use of functional-cost analysis made it possible to study the process of creating the value of innovative products, make operational management decisions to optimize production, and set prices for railway sleepers from modified hardwood.