Managers must have an understanding of cost effectiveness, selling pricing, and budgeting when it comes to decision making across the organization. The organization must be able to accurately budget for variable costs as well as fixed costs while also maintaining an increase in profit and revenue. This paper will discuss the different view-points of decision making across the organization. When looking at the behavior of analysis cost it allows myself to think of it in the perspective of my current business. This is the study of how the specific cost of an item is a direct effect of the business model. I currently have an electrical contracting business that I started in 1992 and when the recession hit prices of material and labor prices remained up but in order to keep revenue coming in price of jobs had to be lower. The consumer became more vigilant in their spending because they did not know where the economy was heading, thus there was a shortage of work. In order to stay in business a costs analysis would have been a great way to prepare for the future. The economy is in a better state at the moment and consumers are beginning to spend again but jobs are priced lower due to the competition that arose from the necessity of electricians to find work. This is an example of Cost Behavior Analysis and having the knowledge of using it can depend on whether the company survives changing times.
The Report on Ethiopian Law Regarding Business Organizations: Analysis on Selected Questions
Ethiopian Law Regarding Business Organizations: Analysis on Selected Questions Business Law By: Aklilu Gebretsadik Addis Ababa University School of Commerce Department of Marketing Management Feb. 1, 2013 Addis Ababa 1, Mention in detail, at least ten essential, points which must be included in partnership agreement. Answer The 1960 Commercial Code of Ethiopia states the following to be included ...
Martinez Company had decided to introduce a new product, however the new product can be manufactured by either of two methods which are capital-intensive method and labor- intensive method. Some might believe that the best model is the labor-intensive method because in order for Martinez Company to succeed it will be important for managers to gain knowledge of accounting. Accounting skills can be used not only to calculate payroll or the revenue generated by the sale of some products but it can also be used to forecast inventory needs, calculate the optimum price point for items sold by the company, estimate market share or even determine the net present value of a project. These are all activities that are crucial for the business to be successful while maximizing its revenue, profits, and growth potential. Additionally each business function has its own need for accounting knowledge and while not all of them are the same they are all important to the business. Human Resources need accounting skills to calculate payroll or the cost of benefits, operations needs accounting to optimize the ordering of inventories, schedules for production, forecasting manpower needs, and so on.
Marketing needs accounting to estimate market size, market share, profit & loss, break-even points, and the ability to calculate profitable price points based on variable and fixed costs. Finance needs accounting to calculate cost of capital, interest payments and be able to make decisions on capital investment. In today’s market companies such as Target and Wal-Mart rely on management decision making. Managers must have the understanding of cost effectiveness within the company and cost-volume-profit (CVP) is an analysis that should not be misunderstood. Management decisions are vital in selling, pricing, and determining product mix for example and cost-volume-profit consists of components at different activity levels. Activity levels are essential because management can analyze how the behavior levels change the volume with change in cost for instance. Variable cost in total activity will become proportionally with change.
The Essay on Cost Accounting Activity Based
Activity-based costing (ABC) is a cost management approach that identifies the processes involved in supplying a product or service and the resources that these processes consume. It uses this information to assign costs, eliminate waste, and improve processes. ABC is a powerful tool to understand the components of a company's costs and their underlying causes. By focusing on the causal factors or ...
If a product variable level increases by 10% the cost will also increase by 10% and the same is the opposite for decrease of cost-volume-profit which includes direct labor, direct materials, and manufacturing overhead. Variable costs remains constant per unit at every level of activity which are: 1. Volume or level of activity, 2. Unit Selling Price, 3. Variable cost per unit 4. Total Fix Cost,and 5. Sales Mix. Additionally fixed cost remains constant as activity changes and it follows that fixed costs per unit vary inversely with activity. Therefore as volume increases unit cost declines and vice versa. Fixed costs include: 1. Property Tax, 2. Insurance, 3.Rent, 4. Supervision salaries, and 5. Depreciation on building and equipment. In conclusion understanding cost effectiveness, fixed cost, variable cost, the definition of cost behavior analysis, and adding the manufacturing of a new product are all essential tools in leading an organization to success. Decision making across the organization relates to all of these methods and accounting tools.
Reference
Kimmel, P. D., Weygandt, J. J., & Kieso, D. (2011).
Tools For Business Decision Making (4th ed.).
Hoboken, NJ: John Wiley and Sons.
