¶ … determinant of the overall profitability of a company. In many instances both labor and product costs comprise a vast majority of a company's expense. Many companies in an effort to mitigate the effects of rising costs have outsourced much of their labor or input costs to other countries. Asian countries in particular have been used extensively for their low cost labor. Through use of cheaper material and labor companies have been able to report higher profits and higher revenues. In fact, corporate profits as a percentage of GDP are currently at an historic high of 10%. This suggests that many companies have used many cost cutting initiatives to help lower costs while revenue growth remains stagnant or low. An important component of cost reductions are life cycle cost analysis (henceforth referred to as LCCA). LCCA is often used as a tool to help determine the most cost effective manner in which to purchase, own and operate an item. Its fundamental premise is grounded in the Net Present Value methodology with some changes to the overall concept. LCCA however is critical for the financial success of both business and not-for-profit institutions in American and developed world. It allows for a systematic approach to appropriately judging the cost of capital for...
Scoping helps investors determine what cost aspects should be included in the analysis or not. There are complications that apply with the scope as it relates to LCCA. For example, if the scope becomes too large the tool may become impractical to use and of limited ability to help in decision-making. This often stifles creativity, innovation and capital planning. However if the scope is too small, then the results may be skewed by the choice of the factors considered such that the output becomes unreliable. This can create problems overall with the investment decision, if it is based on information that is not reliable. Therefore LCCA can be very difficult to assess.
Although difficult to assess this process is very important in regards to valuing capital projects. For one, it takes into account all costs associated with acquiring an asset. This is particular important and useful when comparing projects against one another. In addition, LCCA can be used to help determine cost savings between projects. Costs, as mentioned earlier, are a key determinate to the profitability of a firm. LCCA is therefore used to help determine the overall costs of a project alternative. These cost are often related to both operating and non-operating costs. These include fuel costs, initial purchase costs, residual values, finance charges and non-monetary benefits. When the LCCA method is used, these cost are often increased by a standard amount. This amount is usually…
costing system for use within the Company. Costing systems serve a valuable role in monitoring the health of a company. They are designed to keep a focused eye on expenditures. When the data that is collected and generated by the costing system is integrated into the broader accounting system, the costing approach allows for easy extraction of the data for reports to management. The information that is gathered by a
Companies and Corporate Social Responsibility A Change in the External Environment Forcing a Company to Make Changes in the Way it Functions Example: Rising Healthcare Costs, Rising Senior Population and Deepening Complexity of Medicare Part D lead to AARP/Walgreens Team to Assist Senior Citizens The "Association of American Retired Persons" (AARP) was established to assist senior citizens with their needs, including medical issues (Novelli, 2009), while Walgreens, Co. (Walgreens) is a pharmaceutical giant
Company audit occurs when there is need to examine the performance of a big company especially the financial and the accounting records over a given period of time. Professionals such as the certified public accountant always do the auditing. The audit of a company is significant in the verification of accuracy particularly in the accounting records. A company like coca cola will need an audit to help in verifying their
Company's Compensation And Benefit Package A number of factors determine how a company compensates its employees. These factors may include economics, psychology and even sociology. To an economist compensation is viewed as a labor market determinant (Filer, Hammermesh, & Rees, 1996). As a human resource manager for Vanguard Industries I have been entrusted with the responsibility of explaining to the Chief Executive Officer (CEO) that guided my development of the company's
Company Expanding and Restructuring Many organizations nowadays are undergoing revolutionary and unprecedented change (Robbins & Judge, 2007). With this in mind, it is always advisable for the leaders in the company to change their leadership style (Mintzberg, Lampel, Quinn, & Ghoshal, 2003). This is because the old style may not be flexible with the current form of the company. According to Yuki (2006), leadership refers to the process of influencing other peoples
Joint costing systems should bear in mind the legal constraints on the use of such systems, and should provide accurate information to managers in order to be most useful in the managerial accounting context. Firms need to remain competitive, which indicates that the market will set prices to some degree. This implies that firms can make better decisions with respect to what projects/products they wish to pursue by understanding the