First cut analysis of costs , Managerial Accounting

Assignment Help:

First Cut Analysis of Costs

The allocation of costs and assets will produce a value chain that illustrates graphically the distribution of a firm's costs. It can prove revealing to split the cost of each value activity into three classes: human resource costs, purchased operating inputs, and assets by main category. The proportions of value chain can be drawn to reflect the sharing of costs and asset between activities.

Yet the initial allotment of operating costs and assets to the value chain might suggest regions for cost improvement. Purchased operating inputs will frequently symbolize a larger proportion of costs than generally perceived, for illustration, since all the purchased inputs in the value chain are rarely cumulated. Other insights can result from grouping value activities into direct, indirect and quality reassurance activities, and cumulating costs in each category. Managers frequently fail to identify burgeoning indirect costs and have a tendency to concentrate almost exclusively on direct costs. In many firms, indirect costs not only represent a large proportion of total cost but also have grown more rapidly than other cost elements. The introduction of sophisticated information systems and automated processes is reducing direct costs but boosting indirect costs by requiring such things as sophisticated maintenance and computer programmers to prepare machine tapes. In valve manufacturing, for illustration, indirect cost symbolizes more than 10 percent of total cost. Firms can also find that the total of all quality assurance activities in the value chain is noticeably large. In most of the industries, this has led to the rising conclusion that other approaches to quality assurance in addition to inspection, adjusting, and testing can result large cost savings.


Related Discussions:- First cut analysis of costs

[email protected], Why might managers favour this ABC system instea...

Why might managers favour this ABC system instead of the older system that allocated all MOH costs on the basis of direct? labour?

Conditions necessary in a control cycle, Conditions necessary in a control ...

Conditions necessary in a control cycle There are four necessary conditions that must be satisfied before any system can be said to be controlled. Such are as follows: (1) O

Optimum solution, Optimum Solution From the stand point of implementing...

Optimum Solution From the stand point of implementing the LP solution, the mathematical classification of the variables as basic and non-basic is of no importance and should be

Strategy, explain strategy asa an organisational process

explain strategy asa an organisational process

Predetermined Overhead Rate, Logan Products computes its predetermined over...

Logan Products computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year, it estimated that 39,000 direct labor-hours would

Coca Cola Balance Sheet, Required: 1. Using the information provided prepa...

Required: 1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current li

How much must you deposit each year to reach your goal, Right now you are 2...

Right now you are 20 years old and you have decided that you want to have $2,000,000 in the bank when you turn 65 years old. How much must you deposit each year to reach your goal

Explain standard costing according to backer and jacobsen, Explain standard...

Explain standard costing according to backer and Jacobsen According to backer and Jacobsen, standard cost is the amount the firm to measure the variation from standard costs th

Application areas of linear programming, 5 application areas of linear prog...

5 application areas of linear programing in management accounting

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd