Fixed costs do not fluctuate in reference with the quantity of production. They are called fixed costs since they are fixed regardless of the quantity of manufacture. The costs of facility payment are cover under the fixed cost. Every month is the same regardless of how many cars General Motors produced during that period of time. Elements that can influence variable cost are; supply and demand, task difficulty, location and effectiveness.
In break-even all the cost are fixed or variable. It is just from supply sides which for cost. It assumes that fixed costs are constant. Although this is true in the short run, an increase in the scale of production is likely to cause fixed costs to rise. It assumes average variable costs are constant per unit of output, at least in the range of likely quantities of sales.
This would allow the division manager set a higher selling price than variable costing system. The aim of their decision-making is to have profit maximization through each unit product. But absorption costing may lead to inadequate for managerial decision-making. Secondly, fixed overhead cost may hide in inventory cost. Since company allocated fixed manufacturing overhead on each finished unit in absorption costing, until the company sells a unit, the fixed overhead cost would not neither be record as expense nor show in cost of good sold.
The forecasted cash outflow and inflow for every period must be recognized and additionally the expected discount rate in order to compute NPV. In spite of the fact that the correct value can be identified after project completion but reasonable appraisals can be made by taking a gander at the execution of comparable projects. NPV formula as below where Ct is net cash inflow, Co is total investment, r is discount rate and t is no. of years. The NPV technique empowers companies to change in accordance with the difficulties of working with constrained financial resources.
Using cost volume profit analysis business managers can examine a single product, a group of products, or assess the entire business as a whole. Working across the entire production line in this way gives them a powerful means to analyze financial information. It offers them with daily techniques that are simple to understand and easy to use. Math is very simple with simple formulations. Just simple equations that can be easily adjusted to analyze a variety of situations.
One way by which this problem can be overtaken is to make your own investment that means your organization proceeded to vertical integrate that specific task. If the consecutive activities of the value chain are strategically similar and if you integrate them vertically, that would probably lead to a decrease in costs. How vertical integration can be developed: Every organization should be aware of the fact they can’t get vertically integrated in a single go. Generally one step of the value chain is integrated at a time, then other steps if the conditions are proper. Before integrating it is imperative to study the condition in which your organisation is operating, and who all are your direct suppliers or clients.
Armstrong (2001) identified some key principles and factors to consider in the selection of appropriate forecasting methods. The principles are listed as follows: • Use forecasting methods that contain methodical and detailed steps that can be explained and replicated. • If sufficient data is available, use quantitative rather than qualitative methods. • If large changes in the forecasts can be expected, use causal methods instead of time-series methods. • Unless considerable proof is present that a complex method will improve forecasts, use simple forecasting methods.
The following are the ways by which a vehicle tracking system helps agriculture sector: Complete monitoring of your assets such as vehicles, equipments, workers, etc. Check the usage of equipments Augment customer satisfaction by providing timely service Quick recovery of lost equipments and other assets Real-time maintenance alerts for agricultural equipments Track the valuable assets Eliminate downtime and reduce the chance for unexpected repairs Businesses are always a matter of competition and withstanding this competition is indeed a difficult task. Hence, business persons seek the aid of modern technology to keep their business updated and trendy. A vehicle tracking system is one of the brilliant inventions of technology. Implementing a GPS vehicle tracking system can help your business in the long run and it is indeed a boon to business professionals.