Abstract This paper discusses how all the US Federal Agencies are legislatively bound by decision-making with benefit-costanalysis techniques at a time when they are under increasing pressure to prove the effectiveness of their spending and better accommodate uncertainty. Collectively these Agencies were responsible for making decisions on how they spent $2.5 trillion in fiscal year 2005, of which $1 trillion was for discretionary spending. This research identifies, through a case study of Federal Aviation Administration decision-making for a system within a complex system, how real options thinking can be acceptably and effectively appended to current mandates for benefit-costanalysis defined by the Office of Management and Budget in Circular A-94.
From the Paper "In the work of de Neufville and Wang (2004) it is stated that: "Most real options are not well-defined simple options. They can be compound or parallel. Compound options are often options on options, and the interactions between them are significant." (Neufville and Wang, 2004) Further stated is that: "Parallel options are different options built on the same project, such as the several possible applications or target markets of a new product." (Neufville & Wang, 2004) de Neufville and Wang (2004) categorize 'real options' as "those that are either 'on' or 'in' projects."
Abstract This paper examines and discusses three articles which deal with cost estimates in various situations. Articles discussed are: "Cost Estimate on Stadium Jumps" (David Nakamura and Lori Montgomery) which discusses the cost of building a baseball stadium and renovating Robert F. Kennedy memorial stadium in Washington, D.C; "Life-Cycle CostAnalysis - Evaluation and Economic Investment Team" (Keith Goodman) which argues in favor of a life cycle costanalysis approach, suggesting it is the best method for analyzing costs over time and assessing the overall value and benefit of a project, service or other commitments and, finally, "Activity Based Costing: What is it and how can Reengineering Teams Use it?" (Nancy Maluso) which discusses the basics of activity based costing (or ABC).
From the Paper "Maluso claims that traditional accounting systems are not accurate because they do not allocate costs correctly. Further the author suggests that high volume products and services may actually incur a large percentage of overhead costs but these costs aren't actually assigned correctly. Maluso goes as far as claiming that small batch and low volume products actually incur anywhere from 200 to 1000 percent more overhead than what is actually assigned them. Her analysis is used to justify the notion that products and services that a company might believe are highly profitable are in all reality profit "eaters" according to the article."
Abstract Cost accounting is the process of tracking, recording and analyzing costs associated with the activity of an organization, where cost is defined as required time or resources. Activity-based costing (ABC) is a method of allocating costs to products and services. This paper examines how the major objective of the ABC process is to objectively determine a better way of doing business. It provides examples of costanalysis and concludes that the analysis of these costs and models serves to provide the basis from which decisions can be made and evaluated.
From the Paper "Costs can be categorized in three ways. Direct costs are those that can be traced directly to one output. For example, the material costs (varnish, wood, paint) to build a chair. Indirect costs are those that cannot be allocated to an individual output; in other words, they benefit two or more outputs, but not all outputs. An example would be maintenance costs for the saws that cut the wood, storage costs, other construction materials, and quality assurance. General & Administrative-costs cannot reasonably be associated with any particular product or service produced (overhead). These costs would remain the same no matter what output the activity produced. An example would be salaries of personnel in purchasing department, depreciation on equipment, and plant security."
Abstract This paper presents a marketing plan for the Apple iPhone which defines the company's market specialisation. The paper specifically examines the company's ability to reduce costs incurred, improve operations to become more efficient and to achieve customer satisfaction and customer service excellence. It looks at reducing operational costs to extend profit margins while combining this with a product price discount to increase sales volumes. The paper provides a SWOT (strengths, weaknesses, opportunities, threats) analysis.
From the Paper "A very important technique for managers, it is a detailed breakdown of Apple's sales records. These must be performed at the least quarterly (or sooner) in order to properly track sales volumes. This will allow Apple's managers to stay in touch with the market. We recommend that a 'sales variance analysis' be used as this measures how much is actually being sold compared to projected targets. Micro-analysis combined with a Sales Variance Analysis, to measure sales relating to class of trade, geographic region (country, state or city), retail stores, online, etc measuring average sales per area highlighting sales strengths and weaknesses within those selected regions."
This paper is a classical case analysis presenting alternative proposals to achieve cost reductions in savings bonds processing at the Federal Reserve Bank of Richmond.
Abstract This paper presents a managerial accounting case study. In 1977 all Federal Reserve Banks were being pressured by the Board of Governors to reduce costs by targeting the banks' savings bonds processing activities since cost ratios for the activity at the FRBR were inferior to Federal Reserve System averages. The author uses three methods of analysis, each with three alternatives: Payback Period Analysis, Net Present Value Analysis and Internal Rate of Return Analysis.
Table of Contents
Introduction
Case Background
Methodological Concerns
Results of the Analyses
Payback Period Analysis Alternatives
Net Present Value Analysis Alternatives
Internal Rate of Return Analysis Alternatives Comments and Recommendation
From the Paper "The typical approach to payback period analysis requires that the initial investment be divided by the mean positive annual cash flow or benefit (such as a cost reduction in this present case analysis). In the case of alternative initiative number one, however, the initial investment all occurs in a six-month period. Thus, the annual cost savings attributable to the initiative were converted to semi-annual periods for the payback period analysis of this alternative. Thus, instead of using the formula payback period = initial investment/annual cost savings, the formula payback period = (initial investment/semi-annual cost savings)/2 was applied. The derivations of the costs and benefits used in this analysis are detailed in the NPV analyses. "
Abstract The following discussion will focus on problems with cost-benefit analysis in the context of natural resource policy and development. In order to achieve this goal certain fundamental premises must be outlined and accepted. The cost/benefit approach to natural resources holds that natural resources-from clean water to sub-surface minerals-are commodities that ultimately have a value. It also asserts that economic theories and principles can, therefore, be applied to decisions relating to the disposition of natural resources. As a consequence of these first two premises it does not accept any moral arguments: Notably those that assert that conservation is morally superior to extraction or development as costs and benefits cannot be quantified in this paradigm.
Abstract The paper explains that activity-based costing (ABC) allows accountants to obtain a more precise view of the costs associated with specific products or services. This paper uses a case analysis to explore how ABC can help to achieve greater cost effectiveness in the healthcare industry. The paper concludes that although ABC can play an important role in reducing healthcare costs, little can be done to reduce direct costs associated with a procedure without a sacrifice of patient safety.
Outline:
Introduction
Objective of the paper
Analysis, Findings & Discussion
Suggestions, Recommendations & Conclusions
From the Paper "Activity-Based Costing (ABC) allocates the costs of production to specific products or services. It is more precise than older methods of accounting that involved adding a broad percentage of expenditures to direct and indirect costs. The definitions of direct and indirect costs varied and were often a judgement call on the part of the accountant. ABC allowed accountants to obtain a more precise view of the costs associated with specific products or services."
Abstract This paper summarizes an article related to cost-benefit analysis in the field of information technology, and considers the use of information technology as a business research tool. It looks at the application of CBA to the workplace.
From the Paper "The question of whether the ends justify the means is more than an esoteric philosophical issue in business - the question has resulted in the development of cost-benefit analysis which determines whether the ends benefits ..."
Tags:cost-benefit analysis, information technology, article summary
Abstract This paper presents a comprehensive analysis of Spendless Supermarkets Ltd., based on detailed information of the company's revenue and expenses. The paper examines Spendless's profit and loss statement and balance sheet in order to thoroughly evaluate its financial situation and then makes a suggestion as to whether it is wise to invest in this company. The paper then looks at the advantages and disadvantages of ratio analysis as a form of financial analysis, the effectiveness of overhead allocation based on labor hours, and the effectiveness of activity-based costing.
Outline
Financial Analysis of Spendless Supermarkets Ltd. Advice on Whether to
Invest or Not
Ratio Analysis ? Advantages and Limitations
Overhead Allocation Based on Labor Hours
Activity Based Costing Description - Overview
From the Paper "The net profit margin ratio tells the amount of net profit per $1 of turnover a business has earned. That is, after taking account of the cost of sales, the administration costs, the selling and distributions costs and all other costs, the net profit is the profit that is left, out of which they will pay interest, tax, dividends and so on. The formula is: Net Profit Margin = Net Profit / Turnover* 100 = Profit before Interest and Taxation / Turnover* 100 (Net Profit = Gross Profit ? Expenses)."
An overview of the methods of applying the "activity-based costing system" at Dakota Office Supply, in which actual costs associated with each product are established.
Abstract The paper discusses, in a detailed description, the effectiveness of an activity-based costing system or ABC and the ineffectiveness of the current costing system in use at the Dakota Office Supply (DOS) company . The paper then relates the methodology of implementing ABC at DOS and the procedures involved in its application.
Outline:
Overview
Situational analysis Activity based costing ABC in practice at Dakota
Procedural steps of ABC
From the Paper "Before performing ABC, a baseline or a starting point is needed for business process improvement and a baseline can be expressed in some form of model. This baseline is critical for DOP because in order to establish this baseline metric the analytics just performed must be done for each individual account. If DOP performs this activity on each customer the strategic management benefits would be substantial because all the excess cost-drivers could be eliminated resulting in much wider operating margins and thus profitability without increasing costs or committing resources to gain this efficiency. Therefore, a baseline is a documentation of the organization's policies, practices, methods, measures, costs and their interrelationships at a particular location at a particular point in time (Maiga & Jacobs, 2003). Through base-lining, activity inputs and outputs across functional lines of business can be identified. ABC is the only improvement methodology that provides output or unit costs. Value added activities are those for which the customers are usually willing to pay in some fashion for the product or service. Non-value added are activities that create waste, result in a delay of some sort, and potentially adds costs to the products or services. Resources are assigned to activities so that the activities can be performed in the first place. Some of Pilgrims' resources are measured in man-hours, machine hours as well as machine maintenance and operational overhead. It is through ABC that an organization can begin to see actual dollar costs against individual activities, and find opportunities to streamline or reduce those costs, or even eliminate the entire activity thus removing the cost altogether. This is the process inherent in ABC that reduces overall expenditures of the company. "
Abstract This paper presents a case study of a nurse who suffered injuries due to an accident at the workplace. The paper uses the case study to provide an example of a detailed costanalysis. It breaks down the expenses associated with a particular injury and surmises the overall picture of direct and indirect costs.
From the Paper "A young nurse leaves the hospital where she works after a long shift and trips over a delivery ramp owned and operated by the hospital. The employee suffered injuries to her back and neck. This injury required a hospital stay and a significant amount of time recovering at home. The organization calculated the total cost of the accident that caused the injury to be PS15,130.00 (HSE, par. 2). According to the British government each sector and/or profession has different scales of costs evaluated depending on the severity of the injury. By doing an incident cost analysis, one can determine the amount of funds the organization will spend. The following costs will directly and indirectly billed to the organization."
This paper discusses the impact of mergers and acquisitions on business, providing a costanalysis on merging and acquiring an international organization.
Abstract This paper assesses the impact mergers and acquisitions have on business, including sensible and dubious reasons an enterprise may have for engaging in such a relationship. The paper also analyzes the benefits and costs of mergers and acquisitions and the financial risks associated with merging or acquiring an organization in another country. Furthermore, the paper makes an assertion that communication and understanding lie at the key to every firm's success.
Outline:
Introduction
Sensible and Dubious Reasons for M&A
Benefits and Costs of M&A
Cash and Stock Transactions
M&A Abroad: Risks and Risk Management
Conclusions and Analysis
From the Paper "Shareholders can realize significant opportunities through mergers when they create greater value and improve an organization's ability to grow and produce greater revenues (Galpin & Herndon, p. 1). Ideally an acquisition is initiated to improve cash flow from operating the target firm as the two firms merge together (Stevn, 2005). Cash flow increases when a company buys a target firm or mergers with them when both companies agree the value of the two companies combined will result in higher revenues and shareholder value than if they two companies worked independent of each other (Stevn, 2005; Galpin & Herndon, 2000)."
Tags:cost, international, impact, benefits, finance, communication
Abstract This paper presents a costanalysis of the Valspar Corporation. It discusses the coating industry in terms of supply and demand and then focuses on the company's costs and competitiveness. The paper concludes by examining firm valuation and then examines three categories of the organization's resources. The paper contains graphs and tables.
Table of Contents:
Phase 1
Industry Supply and Demand
The Company's Costs and Competitiveness
Phase 2
Firm and Industry Equilibrium
Firm Valuation
The Firm's Resources
From the Paper "Human resources. The coatings industry is rather specialized compared to other industries. The job requirements include high qualifications in several domains, such as: chemical, technological, R&D and engineering. Given the specialization level, the industry compensation is above the national average. A survey made by the Coatings World (2006) revealed that more than half of the respondents in the coatings industry had a bachelor degree and the majority of them were male (see fig. 5 for more details)"
Tags: competitiveness valuation, supply and demand
