Products and operations

The company that I have explored is Nestle. I will be exploring the cost behaviors of the various costs.  Cost behavior is "an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of cost behavior are usually discussed (Accounting Coach, 2020).

Cost number one- Marketing: Nestle has products that sell around the world and they need to tailor a marketing campaign for each specific country that they sell their product in.  The costs for this will be quite high and in terms of cost behavior will have to change as the pandemic requires a different marketing approach than usual. This will be variable based on the region the campaign is running.

 

Cost Number Two-  Response to Covid-19: Nestle as a company has offered to help deal with the Covid-19 situation wherever the company is present (Nestle, 2020). The cost for this response program will decrease as vaccines are rolled out and the disease becomes less of an issue. This type of cost behavior will also be variable as covid will not be here forever so that costs in dealing with will eventually go down to zero. 

 

Cost Number Three-  Carbon Neutral Target: The company has decided to be carbon neutral by the year 2050 and to use 100 percent renewable energy by the year 2050 (Nestle, 2020). They have a fixed plan to achieve the aforementioned targets. This type of cost behavior will be fixed as they have a specific plan that will mean they have specific costs.

 

Cost Number Four-   Creating Shared Value: The company has 36 plans in place to fulfill its long-term shared value plan. This plan includes items such as being more sustainable and helping 50 million children live healthier lives. This is again a specific plan with specific costs.

 

Cost Number Five-  Production and Distribution: The Nestle company is in the food and beverage business so a large part of their business costs will the production and distribution of their various products (Nestle, 2020). The costs for this will be mixed as some products will be produced based on supply and demand.

 

References

Accounting Coach. (2020). What is cost behavior? Retrieved from Accounting Coach: https://www.accountingcoach.com/blog/what-is-cost-behavior

Nestle. (2020). Nestlé accelerates action to tackle climate change and commits to zero net emissions by 2050. Retrieved from Nestle: https://www.nestle.com/media/pressreleases/allpressreleases/nestle-climate-change-commitment-zero-net-emissions-2050

Nestle. (2020). Our response to COVID-19. Retrieved from Nestle: https://www.nestle.com/aboutus/our-response-covid-19-coronavirus

    Boeing company is an American multinational corporation that is into the process of designing, manufacturing and selling airplanes. The company also has been manufacturing products relating to rocket, satellites and telecommunication equipment. This company has been in operations from 1916 and has been one of the pioneer in airline manufacturing industry. The books that manufactured by this organization will require huge investment and huge labor cost involved. A lot of engineering has to be done and machines have to be crafted. After the analysis of the products that are manufactured by the organization it can be understood that they will have to utilize the process of variable costing because depending upon the situation and depending upon the orders received from other organization the company will have to develop products and gather the resources essential for the products. If the company has a requirement of producing more number of airplanes it has to gather more room materials and which will be considered to be a variable cost.

           As the labor cost and operational costs are also very much likely to be varied in accordance with the demand and situations. So making use of variable costing is considered to help the organization in keeping up their margins and profits. Different types of coasting that can be phased by the organization or fix requesting for their factories and other infrastructure, variable costing depending upon the orders and output produced, semi variable costing for the employees working with them and avoidable costing which will be helping the organization in saving more profits in accordance with Time and demand. Pettinger (2019) states that “Costs that can be avoided. If you stop producing cars, you don’t have to pay for extra raw materials and electricity. Sometimes known as an escapable cost.”

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Reference:

Pettinger.T. (June 2019). Types of Costs

Website: http://www.boeing.com