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Learning and Spillovers
The cost of a value activity can decline over time due to learning that increases its efficiency. The methods by which learning can lower cost over time are many, and comprise such factors as layout changes, enhanced scheduling, labor efficiency enhancement, product design modifications that facilitate manufacturing, yield improvements, procedures that increase the utilization of assets, and better tailoring of raw materials to the process. Learning can also decrease the cost of retail outlets, constructing plants, or other facilities. Therefore the possibilities for learning in an activity are wider than learning by personnel to execute their functions more proficiently. The rate of learning varies broadly among value activities since each offers varying possibilities for learning enhancements. Learning is often the cumulation of many small improvements rather than major breakthroughs. The rate of learning might rise during slack periods whenever attention is focused on decreasing costs instead of meeting demand. Furthermore, learning tends to differ with the quantity of management attention dedicated to capturing it.
Learning can spill over from one firm in an industry to another, via mechanisms like consultants, suppliers, ex-employees, and reverse engineering of products. Where spillover of learning among firms is high in a value activity, the rate of learning might stem more from net industry learning than from the learning of one firm.
EOQ mathematical model As costs of ordering and holding stock are equal at the EOQ point, we can build a simple mathematical model to solve the problem, as follows: (Q/ 2) X
Accounting Profit is a company's sum total earnings, computed according to Generally Accepted Accounting Principles (GAAP), and involves the explicit costs of operating business, l
Differnetial cost analysis uses
Cost driver analysis Cost drivers are factors, which determine the costs of an activity i.e. a change in the cost driver will cause a change in the level of total cost relate
A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts
What is the Responsibility of operating budget when the operating budget of a firm is constructed in terms of responsibility areas it is called the responsibility budget shows
Discuss the dominant compensation philosophy, share value creation and the link between company size and executive pay. Solve Parmalat''s case, which may be found in reading No. 8.
Classification and computation of variances The computation and analysis of variances is the main aim of standard costing. The variance is the difference among the standard pe
REGRESSION ANALYSIS A regression equation identifies an estimated relationship between a dependent variable (the cost) and one or more independent variables (the cost driver).
Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson & Son Manufacturing Company. Tom is manager of the machine shop in the company''s
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