(Questions that will assist in quantifying the relationship between resources and activities include: How much time is spent performing each activity? What equipment is used to perform activities? Do some activities have dedicated equipment? Do some activities require more space than others?) After the data on resources have been collected, establish cause-and-effect relationships between resources and activities or resources and cost objects. The third step in the process is to calculate activity costs. This is accomplished by assigning specific drivers to the activities based on interviews and logical associations. The forth step in the process is to identify cost objects. The next step is to how activities are related to cost objects in terms of time invested for these cost objects. The last step is to calculate cost object costs.
Traditional and Activity-Based Costing Accounting Methodologies
In the past, armed only with traditional management accounting information, managers were forced to…… [Read More]
AC can identify high overhead costs per unit and find ways to reduce the costs, avoid decreases in head counts due to inaccurate allocation of costs, and measure profitability with higher accuracy than traditional costing that uses direct-labor hours as the only cost driver (Activity-based costing, n.d.).
Activity-based costing (AC). (n.d.). Retrieved Apr 2, 2009, from Managers-Net: http://www.managers-net.com/activityC.html
Activity-based costing (AC): What is it and how can reengineering teams use it? (n.d.). Retrieved Apr 2, 2009, from PR online Learning Center: http://www.prosci.com/abc1.htm
Activity-based costing. (1997, Mar 28). Retrieved Apr 2, 2009, from DOE Directives, Regulations and Standards: http://www.directives.doe.gov/pdfs/doe/doetext/neword/430/g4301-1chp24.pdf
Activity-based costing in the information age. (2003, Jan). Retrieved Apr 2, 2009, from NET usiness Network: http://jobfunctions.bnet.com/abstract.aspx?docid=90556&tag=content;col1
Activity-based costing. (n.d.). Retrieved Apr 2, 2009, from Rockford Consulting Group: http://rockfordconsulting.com/activity-based-costing%20(AC).htm
Averkamp, H. (2009). Activity-based costing. Retrieved Apr 2, 2009, from accountingcoach.com: http://www.accountingcoach.com/online-accounting-course/35Xpg01.html
usiness definition for: AC. (n.d.). Retrieved Apr 2, 2009, from…… [Read More]
ut the customized product probably takes much more design and engineering time than the mass-produced product. Traditional costing systems would not, in most cases, pick up this difference.
With traditional costing a company that makes both low and high volume products might spread all of its overhead to products it manufactures based solely on machine hours. This might misallocate overheads between products. And if one product demands a significant amount of engineering, testing and setup, but the other does not, the result will be some level of miscalculation of overheads. AC/TDAC overcomes this problem by assigning overhead on more than the one activity of machine hours. Activity-based costing recognizes that the special engineering, special testing, machine setups, and others are activities that cause costs -- they cause the company to consume resources (Accountingcoach.com, n.d., para. 2-3).
AC became popular in the early 1980s because there was dissatisfaction with traditional accounting…… [Read More]
Activity-Based Costing in Service Industries
Describe the company you researched in one to two (1-2) paragraphs.
Since many traditional industries that deal with goods for sale also offer some service, it was somewhat difficult to settle on a company that dealt in services exclusively. Home Depot or another of that sort would have been easy because they offer both, but the company used for this examination was State Farm. Insurance companies will sometimes offer real products to their customers, but the main product is insurance and State Farm is recognized as the largest seller of insurance of individual automobile insurance in the United States.
The company began selling insurance in 1922 and worked primarily with homeowners in the cities and in the country. The company did work with automobile owners, but because no laws had been passed at the time to require automobile owners to have any form of insurance,…… [Read More]
Activity-ased Costing and Traditional Systems
Activity-based costing (AC) measures the cost of a product/service based on the activities performed to produce the product/service. Activities are processes, functions, or tasks that occur over time and have recognized results. Activities use up assigned resources to produce products and services. An AC system first allocates indirect and support expenses to activities and processes and then to products, services and customers. Therefore, the AC system can provide a better understanding of operations and service to improve customer profitability, product profitability and process efficiency than traditional cost measurements that focus only on costs consumed by products.
There are many examples of the benefits of AC. An information technology company can use AC to understand the cost of serving an individual customer to determine the profitability of that customer. And, a company might want to use AC to determine the cost of the product based on…… [Read More]
General & Administrative-costs cannot reasonably be associated with any particular product or service produced (overhead). These costs would remain the same no matter what output the activity produced. An example would be salaries of personnel in purchasing department, depreciation on equipment, and plant security.
In the next step the results of analyzing activities and the gathered organizational inputs and costs are brought together, which produces the total input cost for each activity. A simple formula for costs is provided - outputs consume activities that in turn have consumed costs associated with resources. This leads to a simple method to calculate total costs consumed by an activity - multiply the percent of time expended by an organizational unit, e.g., branch, division, on each activity by the total input cost for that entity. Here we are not calculating costs, just finding where they come from.
Next, the actual activity unit cost is…… [Read More]
Organizations that need help being more efficient and cost effective look to different concepts for help, one such concept is activity-based costing. Activity-based costing is used to manage an organization better and is meant to help with decision making by coming up with better information about the cost and performance of activities, resources and objects that consume resources ("Activity-based management -- an overview," 2001). This essay will discuss ABC and activity-based management as well as how ABC is different from other concepts and explain three of those concepts; lean-manufacturing, just-in-time and theory of constraints.
ABC is used by the manufacturing industries, the financial service industry, and communications and public service sectors (Blocher, 2008). Activity-based management followed activity-based costing. Taking data from ABC, it uses it to manage the products, portfolios and business processes of the organization in better ways ("Activity-based management -- an overview," 2001). There are other…… [Read More]
ABC (Activity-Based Costing) system to assist Towels & More (T&M) management identifying the type of customer to focus out the three types of customers that the company is supplying its products. The T&M is a small and family company specializing in selling towels. The company sells its towels to three different types of stores that include Departmental Stores, Gift Shops and Specialty etailers. Based on handsome revenues that the company has recorded over the years, the Chief Executive Officer (CEO) decides to expand the business. However, the small gift shops deliver the highest contribution margin, and the CEO is convinced that the gift shops are the appropriate retail outlets to pursue. The paper calculates the distribution costs and customer support assigned to the T&M's three types of customers to assist in the evaluation of the ABC technique for a customer selection.
Cost Allocation for the Three Categories of Customers
The…… [Read More]
Activity-ased Costing in a Service-ased Organization
Activity-ased Costing operates on the conventional approach and applies a two-stage allocation instruction and other cost drivers. First, the system identifies the important activities and overhead costs assigned to each activity in proportion to the resources used. Consequently, for each of these cost pools, cost drivers are identified. Secondly, the assumed overhead cost driver is assigned proportionally to the final outputs of the cost pool. The most important aspect of a proper AC design system is that activities and resources are assigned to cost items based on their use.
In service-based organizations, the AC system must show the actual physical structure of resources and activities and cost items. It is necessary to undertake a precisely executed, correct analysis of operations rather than of the cost figures in the general ledger. Therefore, design is everything in an AC system because each organization uses different levels…… [Read More]
Many organizations have sufficient control over their cost drivers, specifically those that work with activity-based costing; these companies can locate a sufficient amount of cost information within the company to accomplish these analyses in a timely fashion (Chatzkel, 2003). In reality, though, ABC systems are typically structurally complex and, in spite of the need for complete integration of such ABC systems, many such systems remain as stand-alone analysis tools which generally begin with resource-based, rather than activity-based, data fed from the general ledger system (Platt & Towry, 2001).
In their case study of a hypothetical bank, "Activity-Based Costing in the Service Sector: The Buckeye National Bank," Bamber and Hughes (2001) report that, "Banks, like other businesses, are under attack from all sides. Brokerage firms and mutual-fund empires in particular are trying to grab traditional bank customers, and highly profitable ones are the most attractive. To fend off the assault, banks…… [Read More]
Activity-Based Costing at Super Bakery
The management at Super Bakery has developed a very lean business model which is an efficient use of capital. The model is based on the concept of a virtual organization. In this business model the firm owns very few assets that are required for production; by outsourcing to third parties the firm does not need to make the investments that are traditionally associated with production companies. Furthermore, as Super Bakery does not run the facilities there are fewer considerations for ongoing operations. The virtual organization strategy is very effective and leaves the firm in a position which facilitates flexibility and has helped with the firms' ability to increase capacity, which has averaged 20% a year. If the firm had been a traditional organization with its own assets, increasing capacity may have been more difficult and required further investment. The firm has been successful; to…… [Read More]
organization applicability Activity-Based Costing (ABC). CISCO Corporation. Identify a product service organization ABC. You technique selling administrative costs. Then identify activities ABC cost drivers activities.
Activity-Based Costing at Cisco
Cisco Systems is one of the largest global corporations. It is headquartered in San Jose, California, and it employs over 70,000 individuals. The organization manufactures consumer electronic goods, as well as other types of product and services, such as the networking or communication.
Cisco Systems is a private company, meaning that it discloses limited information to the public. The accounting information and methods it uses are as such often withheld from the public. This virtually means that the reader will not know what accounting systems the company uses. However, it is possible at this stage to suggest the usage of ABC in the management of one of their specific products -- the router.
Activity-based costing is an accounting method which assigns…… [Read More]
Therefore, although executive salaries and other similar costs are difficult to assign, a method must be developed for doing so, if the accounting is to be the most effective. One method might be to divide the executive salaries by the average number of patients seen in the facility over the year, or some similar method. This is only one example of how an indirect expense can become a direct expense using ABC methodology.
The purpose of ABC is to serve as a tool for management. If management can see how each unit affects the cost structure, then they can spot areas that are more or less efficient. There are more limitations in managerial abilities to do this in the healthcare industry than in other areas of the economy. This is largely due to the limits imposed by maintaining patient safety. However, cost accounting can still provide an effective means to…… [Read More]
product service organization / company Activity-Based Costing (ABC). Then identify activities ABC cost drivers activities. Estimate application rates cost driver. If identify specific actual amounts, make a reasonable estimate apply tool data factual.
Activity-Based Costing at Ford Motor Company
Ford Motor Company is an international leader of the automobile industry, but it is now faced with escalading problems. A few years ago, the company started sensing competitive pressures from the Japanese manufacturers, who had aggressively penetrated the American market and were gaining increased market share. The outcome was possible as the firm had focused on large size and luxurious vehicles, underestimating the customer demand for small size and fuel efficient engines. Following these issues, the global economy went into recession and the automobile manufacturer was once again hit by a decreased demand for its products (Plunkett esearch).
In order to overcome these challenges, Ford Motor Company is reconsidering its product…… [Read More]
ABC at Netflix
To; CEO Netflix
Re; Move to Activity-Based Costing (ABC)
Activity-based costing has the potential to increase transparency in accounts, compared to absorption costing. Activity-based costing breaks down of the different tasks into the different elements, determining the costs of each activity to create a product or service. This breakdown of costs can them be used to allocate costs for the production process and give an accurate picture of the costs associated with producing each item or serving each customer (Innes & Mitchell, 1998).
Variable costs are easy to allocate to the different products or customers, the greatest value from activity-based costing is the way that fixed, or indirect costs, can be assessed and allocated based on the actual usage. Netflix may benefit from this approach due to the high level of fixed costs and low level of variable costs that are associated with providing…… [Read More]
In a situation where the profit margin can vary greatly between customers that are charge the same price, increased transparency of costing will empower the company to adapt their pricing system so that costs could be more effectively recouped in the way the contracts are negotiated (O'Guin, 1992). Activity-based costing allows for the different stages of a process (the activities) to be costed in an effective manner, including costs that are traditionally assumed as overheads. In maybe argued that the management made a very good decision; the process was one suitable for activity-based costing, with a number of different activities taking place, and the benefits of increasing transparency are likely to outweigh the costs of the implementation with the way it will help both control costs by understanding where costs are incurred, as well as with pricing strategies (O'Guin, 1992).
When adopting activity-based costing the firm could choose from two…… [Read More]
Activity-Based Costing and AIS
Activity-Based Costing (ABC) is an accounting method that identifies the activities a company carries out and then assigns indirect costs (overhead) to products.
Activity-based costing shows the relationships between the activities, the costs, and the products, and correctly associates the lion's share of the resources used with the actual production or provision of services.
The recognition of these relationships enables the indirect costs to be assigned to products in a more rational, less arbitrary manner than traditional methods that would allocate a broad percentage of costs to products without any true measure of the accuracy of the approach.
By using activity-based costing, a company can treat more indirect costs as direct costs. This is important because some products or services consume more indirect costs than do other products or services.
In effect, the activity-based costing enables an accountant to trace the resource consumption and costs, which…… [Read More]
Activity-based costing (ABC) employs numerous cost groups, organized by activity, in the allocation of overhead costs. The conception is that activities are necessitated to generate products, basically activities, such as procuring materials, setting up machinery, assembling products, and scrutinizing finished products. It is imperative to note that these activities can be expenses and therefore the cost of activities ought to be apportioned to products on the basis of how the products use the activities. The costs are placed on the products on the basis of the use of individual products for every activity (Hansen et al., 2007). In the traditional product costing system, to begin with, costs are not linked or mapped out to activities but they are rather traced to a unit within the organization, for instance a department or a division, and thereafter to products. This implies that in the traditional and ABC costing systems, the second as…… [Read More]
This paper is a discussion on Activity-based costing (ABC), one of the costing methodologies used in business. The methodology essentially entails assigning a cost to the various activities of an organization, which range from planning and production to quality control, logistics, and distribution (Kaplan & Anderson, 2007). It also entails determining the amount of time required to perform the activities (Kaplan & Anderson, 2004). The cost and time are then used as a basis for determining the price of the organization's products or services. If properly implemented, ABC can deliver significant benefits to an organization, especially with respect to business performance and competitive advantage (Cokins, 2001). Focusing on Amazon, this paper discusses the use of time-driven ABC in e-commerce activities. First, a brief background of the organization is provided. Next, attention is paid to how a time-driven ABC system can be implemented in the organization and the associated benefits on…… [Read More]
Stadium Jumps" the writers discuss the cost of building a baseball stadium and renovating obert F. Kennedy memorial stadium in Washington, D.C. The cost analysts note that the original cost estimate for the project was too low, and that the actual costs of completing the project could be as much as $91 million dollars more than originally anticipated. D.C. councilmen overseeing the project expect that the total costs for the project could climb as high as $486 million dollars, a problem as the original cost estimate was less than $400 million.
The cost estimate is off because it did not account for additional costs with regard to improvements for roads surrounding the stadium, addition of sewers and Metro routes, the money necessary to completely renovate the stadium and more than $30 million dollars in contingency funds for "the likely cost of overruns."
The problems associated with the poor cost estimate…… [Read More]
Activity-based Costing is a potent tool for an organization and assists in obtaining accurate and efficacious cost for precluding cost misrepresentation that may give rise to sustainable development and growth. Activity-based costing (ABC) was established and has been promoted as an approach of overcoming the systematic falsifications of traditional cost accounting and bringing significance back to managerial accounting. In particular, a traditional costing system reports the amount of money that is spent and by who, but its shortcomings lie in the fact that it does not report the cost of activities and processes (Mahal and Hossain, 2015). ABC systems attain product costs that are more precise in comparison to those reported through the use of multiple cost drivers to follow the costs of activities of a manufacturing procedure of the products that consume the resources utilized in those activities. The ABC system is purposed to offer the most conceivable benefit…… [Read More]
This has long driven up the cost of funding activities pertaining to production and distribution, a condition to which Toyota has responded with the commission of its new facilities.
Accordingly, we find that "Limited supplies of the Prius led to a four per cent drop in U.S. sales this year through August for the market's most fuel-efficient car, even as gasoline prices topped $1.06 a litre. U.S. allocation of the cars is 15,000 a month, little changed from a year ago, said Jim Lentz, president of the Toyota City, Japan-based automaker's U.S. sales unit." (M.P., 1) This means that there is an activity-based cost relating to the acquisition of such batteries that likely exceeds that of in-house battery production. This strategy would be expected in the long-run to reduce the overall cost of the vehicle by reducing the market scarcity of the battery.
Mixed Power (MP). (2008). Toyota…… [Read More]
The applicability of Activity-Based Costing for decision making is directly linked to the influences that ABC has over process control. In this order of ideas, by better identifying the incurred costs or the overhead, managers can better monitor and control the evolution of products, prices, costs and consequently, profits. ABC identifies the costs incurred by each item in terms of resources consumed. Therefore, with the aid of ABC, organizational managements have the ability to control resource allocation.
Activity-Based Costing reveals yet another significant feature: it has the ability to evaluate the costs of not producing an item. This basically means that with the aid of the ABC, managers are able to know how much they have lost due to machine malfunctioning, product damaging, increased inventory costs or time spent waiting for a machine component to be replaced. "Activity-Based Costing therefore gives not only much better cost control, but increasingly, it…… [Read More]
STANDARD-ASED COSTING AND PERFORMANCE MEASURES FOR TODAY'S MANUFACTURING ENVIRONMENT
This paper outlines the various defect of the standard-based costing method and how they do not effectively measure manufacturing environment of today. It has 8 sources in Turabian style.
Cost control is needed by businesses to plan the actual cost it might incur on the production of certain commodities. The budget is an overall costing system but sub-division is needed if and when the company requires detailed cost structure of the department. This is necessary for achieving the overall goals of the organization.
In production organizations, such as manufacturing companies, the basic concern of the management is to have smooth operations with the least cost possible. There the existence of cost is measured by the tangible output each component of the department produces. Income is compared to the cost incurred. A system that is set for measuring the performance level of…… [Read More]
In Thompson's version of a bureaupathology, the actions of individuals do not advance society or themselves, but rather the goals and objectives of the bureaucracy itself, which may not even benefit society as a whole. Individual members become subordinates to authority positions that often find themselves overly arrogant, and potentially even corrupt because of the lack of accountability other members of the bureaucracy hold them to.
There are a number of examples which O'Hara gives of failed strategies that clearly resemble Thompson's idea of a bureaupathology. First, in the prologue, O'Hara discusses Hoover's FBI and how it failed to adhere to the very laws it was supposed to protect with arrogance and exaggerated sense of power leading Hoover to take on personal vendettas, secretly spy on American citizens, and negatively influence the process of American politics. Moreover, O'Hara provides another example of the Philadelphia Police Department and its correlation to…… [Read More]
The cost driver for Underwriting costs are "review hours' in the form of labor costs and the cost driver for Technology cost is 'IT hours'" (Kren 2008). In the scenario, some costs involve committed resources that cannot be easily adjusted while others do not. ABM provides guidance as to how to adjust the flexible aspects of the enterprise. For example, the average cost per hour for the Underwriting input at the plan level of activity is $44.13 but when the organization is operating at full capacity, the average cost per hour falls to $38.00, "because the cost of resource that is not needed is being spread over the service that is needed. Thus, one could argue that $38.00 per hour represents the 'true' cost because there is no excess capacity cost to burden the resource that is needed" (Kren 2008). Reducing non-full capacity operations is deemed critical to reducing costs.…… [Read More]
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 cost structure of the product. If the product is not viable at the cost at which it can be produced, then the firm can improve profitability by dumping the product.
Banham, R. (2000). Off target? CFO Magazine. Retrieved April 5, 2011 from http://www.cfo.com/article.cfm/2990860/c_3046531?f=magazine_alsoinside
Frederick, S. (2011).
The persuasive power of opportunity costs. Harvard Business Review. Retrieved April 5, 2011 from http://hbr.org/2011/01/column-the-persuasive-power-of-opportunity-costs/ar/1
Katz, D. (2002). Activity-based costing (ABC). CFO Magazine. Retrieved April 5, 2011 from http://www.cfo.com/article.cfm/3007694
McKinsey & Co.…… [Read More]
Another example of pure job costing is web development, where the processes themselves vary hugely from project to project, meaning the cost and time involved also varies.
Dosch & Wilson (2010) do seem to do a good job of defining job and process costing, and the person who posted this seems to have understood these definitions fairly well in the abstract -- that is, the definitions provided seem reasonable and the application of these definitions to businesses chosen by the poster are explained in a way that clearly links them to these definition. At the same, the poster seems to have had some trouble accurately identifying companies where job costing might be employed, despite grasping the abstract technicalities of the definition of job costing. While it is likely that an individual laborer might be able to identify that they worked on a particular section of an airplane or wall…… [Read More]
&D activities fall into four pools with the following annual costs.
Market analysis $1,050,000
Product design 2,350,000
Product development 3,600,000
Prototype testing 1,400,000
Activities Cost Drivers Estimated Drivers
Market analysis Hours of analysis 15,000 hours
Product design Number of designs 2,500 designs
Product development Number of products 90 products
Prototype testing Number of tests 500 tests
(a) Compute the activity-based overhead rate for each activity cost pool
Activity-based overhead rate = total budget overhead / basis
= 1,050,000 / 15,000
= $70 per hour (Market Analysis)
Activity-based overhead rate = total budget overhead/basis
= 2,350,000 / 2,500
= $940 per design (Product Design Number)
Activity-based overhead rate = total budget overhead/basis
= 3,600,000 /
=$40,000 per product (Product development number)
Activity-based overhead rate = total budget overhead/basis
= 1,400,000 / 500
= $2,800 per test (Number of tests)
(b) How much cost charged to an in-house manufacturing…… [Read More]
Product Costing systems (ABC, job costing, put costing, .) advanced topic managerial accounting the thesis statemenit a position body paper show evidence support position. The paper discuss opposite point view discuss position valid.
Product costing systems
Product costing system is a management tool which identifies the actual cost of producing each product. It identifies the profits and loss which can be gained or incurred on each product, hence giving companies the opportunity of identifying and promoting of profitable product while dropping, re-pricing or redesigning of unprofitable products Brierley, 2008.
Product costing is a highly sensitive area for managerial accountants, recently, most of them have changed their focus such that they give their attention to appropriate treatment costs which are directly associated with resources that are committed to support activities, which within the company do not vary proportionally to production once the initial capacities have been set. In such as an…… [Read More]
Many managers who already are involved with competition in time-based industries realize that manufacturing strategy is often influenced by the traditional cost management system and this proves to be a mistake as time management system might have worked better (Hutchinson, 2007, p. 31). In the manufacturing sector, the traditional managerial cost accounting reporting system is still used but as many managers are ready to adopt the advanced manufacturing strategies and technologies, the managers object to the inclusion of cost accounting system as the only decision criterion in manufacturing (Hutchinson, 2007, p. 32).
The managerial cost accounting reporting system should also involve the activity of performance measurement that provide an impressive influence on the performance and motivation of the workers. Furthermore, it also provides extra information for the managers to take proper decisions that may help in achieving the pre-determined organizational goals to achieve future prospects and profits (Maskell, Baggaley, 2001,…… [Read More]
Q1. Explain the differences between cost-effectiveness and performance management. Which performance elements are essential for assessing financial soundness of a nonprofit?
Although sound financial performance is clearly critical for an organization to flourish, cutting costs is not synonymous with performance management itself. An organization can be maximizing its cost effectiveness but not necessarily its performance. Performance management sets specific goals for employees. Goals must be measurable to be clear and effective but not necessarily tangible in nature. “Performance management is a whole work system that begins when a job is defined as needed” (Heathfield, 2018, par.3). It starts with the hiring process, beginning with an effective job description of each employment position. Each employment position should be linked to specific organizational needs. This is followed up by training and monitoring that evaluates the candidate’s performance over time based on those needs. Presumably the performance markers are also linked to financial…… [Read More]
Profit Analysis and Costing for the 21st Century
Value costing is about looking at the different aspects of a business paying particular attention to the opportunity cost they represent, how much they are likely to financially benefit a firm, and how much they are likely to cost it. Through this analysis, it is possible to determine the parts of the business that function the most efficiently and locate the parts that do not.
It is thought that value costing is no longer relevant because business has become far more complex than the traditional format, and with the rise of the internet and the increase in ebusiness, more and more factors must be added to the equation. It is also though that this form of costing is not only too simplistic, but takes too long to put into practice, and harder still to gain any meaningful results from. Value costing tries…… [Read More]
The notes in the around the Activity box are actions needing fixed at the present time such as detecting allocation and costs and most importantly the priorities of the hospital's maintenance.
The diagram then has a box drawn below labeled objects in both methods, yet these objects are defined to ABC by tracing activity drivers because it represents products/services and customers while the current method looks at only products and services of pharmacy maintenance repairs which is derived from the custom way where allocations such as the direct cost of supplies, labor, administration on the basis of square footage. The focus is on costs vs. Activity-Based Costing and cost cannot control expenditures, yet it in comparison to cost accounting current at Jumper Hospital, it will permit the facility to see the what they do have control of, what has been done including the management that provided regularly or on a…… [Read More]
Direct costs are those that can be "attributed to the production of specific goods or services" (Investopedia, 2013). They can be labor, materials or other expenses. In contrast, indirect costs are those that cannot be directly attributed -- at least not easily -- to a specific product or service. For the most part, identifying direct costs is a straightforward, but occasionally there are pitfalls that can emerge.
One pitfall when analyzing direct costs is to attribute all costs as direct costs, on the basis of how a single cost item breaks down. For example, if direct materials are allocated to products based on the allocation of direct labor costs. A two product company could allocate direct labor 40-60, and then use that split to allocate direct materials costs. That would be risky, because there might not be a connection between the two products with respect to their usage of labor…… [Read More]
Direct cost is a cost that is involved specifically and directly in the production of a good or service (No author, 2013). For example, in the production of a hamburger direct costs would be the ingredients. If the person cooking the burger only cooks burgers, and does one burger per hour (just an example), then the direct labor cost of that burger would be one hour's worth of wages. Sometimes, however, it can be more difficult to determine the direct cost of producing a good or service, and that is where the risk of errors comes into play.
For example all costs can be taken as direct costs. This is a common error. There is a logical slippery slope involved in attributing costs. So for example, our burger flipper might flip an average of 40 burgers in an hour. The company might be tempted to average that wage over the…… [Read More]
accounting important success firm? What methods cost accounting ? The paper (a) identify main issues chosen area, (b) reference learning occurred, (c) build class activities incidents facilitated learning understanding, (d) present specific current / future applications relevance typical workplace.
Cost accounting -- definition, importance, methods
The modern day society is constantly presenting the economic agent with more numerous and more pressing challenges. In order to face them and emerge as a competitive institution, firms develop and implement a wide array of strategies, such as creating customer value, developing the skills of the staff members, establishing strategic partnerships or creating financial stability and accountability. One specific means in this endeavor is represented by cost accounting, which represents a key to organizational success. The current project focuses on the identification of the reasons as to why cost accounting is important to organizational success. A secondary research objective is that of pin pointing…… [Read More]
Sound usiness ased on Sound Finances
Podosave Ltd. is a food retail organization for which I will present a financial analysis based on the information I gained and the knowledge I acquired as a result of my role within the business.
My role was to work within the business, recruiting for vacant positions and training existing employees in order that they were able to attain relevant skills for their roles. Reporting to Head Office, I would relay information that was relevant to the HR department and act on the department's behalf.
The role of financial management in business
Financial management is fundamental to the success of a business and the strength of its financial 'health'. Those who work in managing a firm's finances should be able to identify its strengths and weaknesses whilst locating opportunities for growth. A key component of this is to compare financial statements against…… [Read More]
Business 315 and Analyzing Direct Costs
It is crucial for an organization to properly calculate semi-variable costs in order to allocate indirect and direct costs. These costs govern over direct materials, which are "materials that physically become part of a product or service and therefore are clearly indentified with specific outputs or service" (Thompson 2011). Semi-variable costs change often, depending on the volume of the output. These mixed costs are associated with both fixed and variable elements to production. These costs are often broken up using the cost-volume formula which takes into account activity measures like labor as well as the fixed costs and variable unit rate. This helps an organization then outline indirect costs, which are those costs that are unable to be specifically outlined or traced according to a corresponding cost object (Thompson 2011). Essentially, indirect costs are associated with activities of an organization or enterprise…… [Read More]
This accounting report is intended to emphasize the importance of the role of a management accountant in business operational and financial decisions. The focus on two companies engaging in different lines of business with disparate concerns, questions, and issues provides a basis for the reader to understand specific instances in which a management accountant can play a pivotal role in the success of an enterprise. W. White Chemicals was perplexed about their loss of market share and a small drop in revenue. When the executives came together to discuss the problems, they each had a different opinion about the source of the problem and the possible solutions. The management accountant was able to demonstrate how a change from the traditional accounting system the company was using to an activity-based system would help the team interpret the market situation and get a handle on the actual, rather than the obfuscated,…… [Read More]
The author of this report is to speak on two major topics in this brief paper. The first topic is inventory management in the context of getting the right amount of a product where it needs to be and when it needs to be there. Further, there will be discussion of the ABC system as it relates to a firm that the author of this report is familiar with. There will also be a discussion of lean synchronization and its overall goal of perfect quality with no waste at all. There are two forms of waste in particular that will be discussed and those are waste from irregular flow and waste from inflexible response. While perfect quality with no waste is not really feasible, it should always be the goal for a firm that is serious about quality and proper inventory management.
When it comes to inventory…… [Read More]
Deere Cost Management
1. What happens to procurement and its relationship with the supply based when the need for budgeted cost management interferes with communication, relationships, and other outside market pressures?
The procurement and its relationship with the supply based when the need for budgeted cost management interferes with communication, relationships, and other outside market pressures. This state of affairs develops a competitive advantage owing to the strategic discerning to make procurement and supply base. The communication evades being financial damage as a result of the precise procedures between procurement and supply base. The relationships generate trust and other market pressures generate culpability between procurement and supply base efficiently and efficaciously. This state of affairs strengthens the company’s market share in the business setting with massive success (Fredendall and Hill, 2016).
2. How does market competition influence your ability to sell for a price that allows you to cover costs…… [Read More]
What kinds of information does a firm need to evaluate and choose among pollution abatement options?
Environmental accounting is a field of environmental science that deals with the identification of resources and their appropriate use as well as deliberating on reducing pollution. The use of this field of knowledge has enabled environmental managers to ensure that there is a safe environment for all people. This field has been part of the larger field of accounting practice for a long time. Its specialization in environmental issues is what makes it be studied under environmental science.
Pollution abatement is a field of environmental accounting that deals with ways that are used to mitigate the effects of pollution by barring the major causes as well as minimizing the effects. Several methods that are used include barring the causes, minimizing the effects of an already existing harm and the use of sanctions…… [Read More]
Activities to Reduce Inappopiate Behavios Displayed by Childen With Autism and Othe Developmental Disabilities
The pupose of this dissetation study is to test the effectiveness of an eveyday activities-based potocol (Holm, Santangelo, Fomuth, Bown & Walte, 2000) fo managing challenging and disuptive behavios of 13- to 23-yea-old esidential students (male and female) with Autism who live at Melmak Homes, Inc., of southeasten Pennsylvania, and attend school o adult day pogams. Applied behavio analysis and a focus on eveyday occupations (activities) will be combined duing the intevention phase. Reinfocement will be fo subtask completion and duation of paticipation, NOT fo absence of taget maladaptive o disuptive behavios. Behavio analysts, howeve, will document the fequency/duation of the taget behavios duing each condition. Inteventions will occu daily, Monday though Fiday. A single-subject, multiple-baseline, acoss-subjects design with nine subjects will be used to evaluate change in behavios unde altenating conditions. Data will be analyzed…… [Read More]
CVP is very useful for small business also because the analysis takes
into consideration variables like eturn on Investment, or Customer
Acquisition Cost. This analysis allows the company to determine what the
maximum profit volume can be, and how the above mentioned variables can be
changed in order to become successful.
CVP analysis is also able to determine the results of media campaigns,
especially for small business, where results are more visible and can be
observed after a shorter period of time. Furthermore, these results can be
translated into a successful company strategy, given the fact that the
strategy would be based on verified results. In relation to this, market
share can increase due to such a strategy.
For small business, CVP analysis is also used in establishing the
company's budget for certain activities. The analysis is able to provide a
flexible budget variant, which is exactly what a small…… [Read More]
Controlling Construction Cost:
It is seldom that the initial bid estimate to carry out a specific construction activity is the same as the actual cost of doing the work. Generally, the estimate cost tends to be higher or lower due to the various unforeseeable factors that contribute to the differences. Therefore, it is increasingly essential for the project manager and contractor to keep current on the costs of a project through maintaining an accurate and reliable cost control system, especially if a contractor is to make a profit. However, the project manager has an overriding role of providing the project management team with necessary strong and proactive leadership during the construction period. This overriding role and task includes ensuring that the most effective approach to control construction has been adopted and tracking construction activities and costs.
Since the construction phase of a project is usually affected by various external factors…… [Read More]
Differential Cost strategy when used by an educational entity such as UOS means that the institution determines what it would cost to offer alternative forms of education based on the number of students interested in choosing those alternative forms. In other words, by offering choices to the students based on the student's specific needs and desires and then measuring the difference in cost when compared to other educational offerings, the school will know exactly what the differential cost is. This allows the school to offer courses and activities in the most efficient and effective manner, and in a manner that produces the highest amount of revenue with the lowest cost. By knowing the difference between the school's offerings and what the same type of offerings are being offered by their competitors, the school will be capable of offering more for less. As an example, if the school…… [Read More]
Tourist Behavior Toward Nature-Based Tourism Activities
For most of the developing countries tourism industry is playing a very important role in boosting their economies. In 2004, it was found out that Asia Pacific was one of the fastest growing tourism regions (Cruey, 2005). According to WTO, up to 3% of world's tourism market is made up of Thailand, Indonesia, India and Sri Lanka. It was in 1970's that the development of Thai international tourism started (Mcdowall and Wang, 2007). Tourism industry accounts for 5.1% of Thailand's National Gross Domestic Product (Tourism Authority of Thailand, 2009). For the purpose of providing a proper development direction, the National Economics and Social Development Plan (NESDP) served as a guide (Mcdowall and Wang, 2007). The result of the survey which was conducted by the Universities of USA and Thailand, showed that Thailand stood on the first place as best hospital city for all the…… [Read More]
RSMean is used for construction estimating. Many construction projects can be difficult to estimate and the RSMeans database is a useful tool in preparing a bid for a client. The database can be used to calculate a construction project based on square footage, the equipment used and the materials used. The building cost index that is used in the system has been compiled over time and includes cost information about industry averages for specific construction activities. This index can account for the increased costs of a construction project that are due to factors such as inflation, cost of materials, and the cost of labor. For example, cost information from a construction project in the 1980s can be adjusted to represent what a similar project would cost in today's market. The accuracy of such estimates is considered to be within twenty to thirty percent of the actual costs. Therefore there is…… [Read More]
activities, the services we will be proposing will deal with a certain set of activities that a working individual has less and less time for and will be tempted to turn to a specialized company that will help him deal with such kind of activities. Paying bills, shopping for groceries and other needed products in the house, requiring information to the banks for credits or payment options, going with the car to the car service -- these are the sort of activities that the modern individual has less and less time for and is more and more inclined to simply outsource.
As such, our company will deal with providing all these types of services for our customers, services that are likely to create more leisure time for the working individual and remove the unnecessary hours spent dealing with the home administrative problems.
This introduction already gives a little insight in…… [Read More]
Activity Studies found common features high-performing health departments manage diabetes. These departments include receiving external funding programming, a -management education program recognized American Diabetes Association, partnership opportunities.
While obesity and obesity-related complaints such as Type II diabetes are a problem all over the United States, in my home state of Georgia, the condition has been of particular, growing concern. According to the Centers for Disease Control (CDC), "64.8% of adults were overweight, with a Body Mass Index of 25 or greater" and "29.6% of adults were obese, with a Body Mass Index of 30 or greater" in the state (Georgia's response to obesity, 2012, CDC). Even more worrisome, amongst adolescents who should be at the most active stage of their lives, "14.8% were overweight (>85th and < 95th percentiles for BMI by age and sex) 12.4% were obese (>95th percentile for BMI by age and sex)" (Georgia's response to obesity,…… [Read More]
activities which are more popular or enjoyable than sitting down to watch a movie with a steaming bag of freshly popped microwave popcorn. The smell and taste of microwave popcorn both invoke strong sensory cues often associated with the pleasant experience of cinema viewer-ship. It is not often that we stop to consider the content of these convenient single-serve bags, either nutritionally or chemically. However, new evidence is emerging all the time to suggest that there are significant and alarming health imperatives to begin examining our popcorn more closely. As the discussion here will show, popcorn as a snack-food is fairly innocuous and, in fact, if served properly, can be an excellent low-calorie source of carbohydrates. However, when combined with the synthetic substances, the additives and the packaging compounds used in a bag of microwave popcorn, popcorn can present its consumer with severe health risks.
This is particularly troubling because…… [Read More]
Health Care Cost and Quality
The objective of this study is to examine the relationship between health care cost and quality. This study will select one public agency and one private agency and differentiate their roles and major activities in addressing cost and quality in health care and analyze current and projected initiatives to improve quality while simultaneously controlling costs. This study will additionally conduct a synthesis of indications for staff nurses and advanced practice nurses, including evidence-based practice, relative to cost and quality.
There are many initiatives presently underway to meet the growing need of health care for a population that is greatly under-insured and many that are uninsured.
U.S. Department of Health and Human Services eport
According to the U.S. Department of Health and Human Services (2014) "Medicare is improving the way it pays for physician services. The Center for Medicare and Medicaid Innovation (Innovation Center) is exploring…… [Read More]
The delivery health care system takes into account the assimilation of physicians, healthcare facilities, together with other medical services with plan to facilitate the provision of the total continuum of medical care for its consumers. In a whole incorporated system, the three fundamental components including physicians, medical facilities and the membership to health plans are counterpoised in terms of equating medical resources with the necessities of patients and purchasers (Coddington, Moore, and Fischer., 1994). One of the key concerns in the present delivery of healthcare is cost. Increasing costs of healthcare has been a major worry in the past number of years, making the United States to have one of the most expensive systems of healthcare. The main objective of this paper is to analyze the different costs linked to healthcare delivery system, and delineate the manner in which these costs impact different populations and how it also affects…… [Read More]
Healthcare Quality and Cost
Despite the fact that there is a comprehensive policy agreement that both cost control and quality enhancement are vital, the relationship between health care costs and quality is one of contention in debates in health care policy. One conceivable aspect is that enhancement in quality necessitates infusion of investments or on the contrary, reductions on cost could diminish quality. On the other hand, improvements in quality could decrease costs by diminishing intricacies or healthcare facility readmissions. As a matter of fact, the relationship between cost and quality possibly lies between these two ends, so that some kinds on health care costs are linked with high quality and others with poor quality. The impact is reliant on the areas the funds are expensed (Hussey et al., 2013).
Select one public agency and one private agency and differentiate their roles and major activities in addressing cost…… [Read More]
The Equal Employment Opportunity Commission (EEOC) is far and away the most prolific and omni-present agency that exists in the United States, at least at the federal level, that regulates employers and protects employees from discrimination and other unlawful and/or unethical employment practices including inequity in who is hired, who is fired, who is promoted and why, who is given raises and why and so forth. While budgetary constraints and some of the EEOC's recent decisions certainly deserve attention and scrutiny, the EEOC's status as the ultimate arbiter of employee rights in the United States is not going to change anytime soon.
The mission statement of the Equal Employment Opportunity Commission (EEOC) is to "stop and remedy unlawful employment discrimination" (EEOC, 2014). The vision statement of the EEOC is "justice and equality in the workplace." The EEOC states quite clearly on their website that they know full well,…… [Read More]
Nu Star Energy L.P. is a limited partnership that is publicly traded and headquartered in San Antonio. It has 9,063 miles of pipeline, eighty-six terminal facilities, four storage facilities for crude oil and two refineries for asphalt. It is the second in size among independent liquid terminal operators in the United States. It operates in the U.S., Netherlands, Canada, United Kingdom, Antilles and Mexico. The entire system of the partnership can hold up to 86 million barrels in its storage infrastructure. It has refineries for asphalt, crude oil and has pipelines for refined products. Also present are terminals for refined products, a storage facility for petroleum, a terminal operation as well as storage facilities for crude oil. NuStar strives to protect the environment and continually works to improve its programs and processes so as to meet even the most stringent of environmental practices. This has resulted in better environmental performance.…… [Read More]
a) i) Using direct labour hours as the cost driver for the overhead costs, the following table presents the net profit calculation for each line of motorcycle:
Activity-based costing is designed to allocate overhead costs based on the resources that each activity consumes (The Economist, 2009). The key to activity-based costing is that the cost drivers are assigned differently, and in a manner that should better reflect actual resource usage than a cost driver that may be picked almost at random (Investopedia, 2013). Using ABC, the following are the net profit calculations for the three different products at Vroom.
2800000…… [Read More]
Despite the fact that, based on the 25% mark-on, product A was the first to be dropped, the item maintains the highest contribution rate due to its increased retail price.
If the company wants to trace all variable costs to its product accurately, the allocation methodology that uses labor hours could be used. This type of estimate will come up with a dollar rate per labor hour and then the average variable cost per unit can be evaluated, depending on the number of labor hours used to manufacture the product. In this case, for example, for each of the products A through D. there is a certain number of hours that is used to manufacture the product (6, 1, 3 and 2 respectively). The overhead cost per hour is calculated by dividing the variable overhead by the total number of hours. The variable cost per unit according to this…… [Read More]
The costs allocated to a cost object can be considered as fixed or variable as well as direct or indirect costs. There are two types of costing systems that are used by management accountants i.e. job-costing systems and process-costing systems. While job-costing systems mount up and track costs differently for every product or service, the process-costing systems are basically used by companies manufacturing huge quantities of similar or identical products. Notably, companies usually classify manufacturing costs into three various categories i.e. manufacturing overhead, direct materials, and direct labor ("Systems Design: Job-Order Costing," n.d.). Even though direct materials and direct labor costs are traced to jobs, manufacturing overhead costs are not traced to jobs in similar ways. However, manufacturing overhead costs are included with direct materials and direct labor on the job cost sheet since it is also a product cost. Assigning these costs to overhead units…… [Read More]