Individual overhead of support work are distributed differently for different products as one product may consume more of support resources than another. Traditionally, in value chain analysis the overhead is not calculated in such depth. Overall, the support activities are added in much detail in ABC model including the costs of plant security to the insurances etc. This much detail and classification is not achieved in value chain analysis where the main motive is to include activities only which are linked appropriately in the value creation process. Thus ABC model digs way deeper in support activities to get know of the cost to cost driver component of every existing activity and make their understanding far better for a firm as
Large Amount of fund in Capital Budgeting: Funds are limited and opportunities are abundant. Capital investment involve commitment of large amount of money, if funds are committed into one project, the company may forgone other project. Thus, prepare a great planning before invest is necessary. ii. Irreversible decisions in Capital Budgeting: Capital budgeting decisions in most of the situations are irreversible because it is difficult to find these assets due to these are no a ready market.
The useful life of an intangible asset is the period over which the asset is expected to contribute to the future cash flows of the entity. Intangibles with a fixed useful are amortized. However, intangibles with indefinite useful lives are not amortized but are subject to impairment. Other relevant factors include the legal or contractual provisions, the level of maintenance expenditures required to obtain future cash flows, and the effects of obsolescence. (para 11 SFAS 142) c) Jonas Tech Corp’s suggested treatment of goodwill is unacceptable because the U.S. GAAP requires that goodwill acquired in a business combination is allocated to the reporting unit through which it was obtained.
Introduction: Criticisms of traditional costing techniques. Numerous criticisms have been brought up on the practice of Traditional Costing which is explicitly Absorption Costing. It has been unsuccessful to allocate the true production cost since the fixed production costs have been allocated with minimal or limited cost driver pools and furthermore, they ignore non-manufacturing costs such as selling, distribution and administrative costs. This was due to the fact that traditional costing methods mostly rely on the arbitrary allocation of indirect costs which means that managers do not get the full picture of the total cost of a commodity hence leading to inaccurate profitability calculations. A certain technique was adopted by the philosophy brought forward in the book “Relevance Lost”- The rise and fall of Management Accounting by Johnson and Kaplan (1987) critiquing the traditional costing system proposing that it is number of transactions involved in production that increases over heads rather than time.
Market failure: It means that the market can not be efficient allocation of goods and services. Market failure can be seen as someone who wants to pursue personal interests leads to this result. “It describes any situation where the individual incentives for rational behavior do not lead to rational outcomes for the group. Put another way, each individual makes the correct decision for him/herself, but those prove to be the steady state disequilibrium in which the quantity supplied does not equal the quantity demanded.” Merit goods: means that goods and services that the government feels that people will under-consume, and which should be provided free at the point of use so that consumption does not depend primarily on the ability to pay
You would not be able to get the goods you wanted and in some case, the goods you needed. Because companies and societies alike choice to produce products not based entirely on need, but on profitability in response to scarcity, the limited supply with endless wants. (Tucker, 213) Choices based on scarcity leads to producing or preforming the activities that result in the biggest payoff for your effort, some places no longer are self-sufficient and are dependent on others for basic goods and services. (Tucker,
This position allows the firm to obtain abnormal profit in the long run when it operates at the profit maximising point, where marginal cost equals marginal revenue. The products in the industry are non-homogeneous and hence, they do not have close substitutes. A monopoly is characterised by asymmetric information. Consumers, who buy the product, do not have the same information as the supplier and
In the event that the limitation for general damages is not present or, if it is present but found to be unenforceable the overall limited of liability should cap the organisations liability. Most organisations will have a policy whereby the Contractors overall liability, to the Company, for breach of contract should always be limited in some way. This can be expressed as a percentage of the contract value (in this case the contract value should be clearly defined if possible) or as a specific sum of money. Limitation of liability clauses and exclusion of liability clauses are often difficult to enforce as the courts in many jurisdictions do not encourage parties to a contract to be allowed to exonerate themselves from their liabilities. In addition to having wording to limit the liability for breach one approach to limit your liability is to ensure that the scope of work and the obligations in the contract are well defined and clear.
The resulting outcome is the Survival strategy . Survival strategies are aimed at resisting as much as possible the adverse effects the surrounding situations might have on a company. These strategies are suitable if a company is facing external threats without the necessary internal strengths to fight against them. Example are the high prices of a company that cannot be varied due to fixed costs etc. If this is met by a market that does not accept high prices but only seeks low-cost products, there is only one way: turn around.
These schemes may contain the valuable data for such research, but generally they can even prevent the analysis of expenses: systems of the account demand rigid classification of expenses according to structure of the database — in such categories as, for example, costs of the main and additional work or overhead costs. Such use of terms of accounting systems leads to the fact that in one category considers the costs of implementing activities with radically different economies. On the other hand, the artificial differentiation of the cost of labor, raw materials and overhead costs relating to the same activity takes