Business Finance - Management Homework PM and FM

Option 2

Consider your current organization, describe how costing is used or could be used to better understand the financial breakdown of products and/or services delivered. Would this information support you in your current role and/or aspired-to role? Have you seen instances where costing is not used effectively or could be better leveraged?

            Costing is one of the rudimentary approaches used to examine the cost distribution of products and services provided within an organization. It entails determination of total cost that is incurred in the provision of goods or service, and may consist of immediate costs such as raw materials and manpower, and the indirect costs which may be hidden and may include administrative expenses (Artiach, 2023). When these costs are properly incurred and allocated then the exact profit made by the organization is reflected in each product or service that is offered. This is important as it helps in decision making especially the pricing of the products, spotting any areas that can be cut on cost and hence improving efficiency. In my current position, this specific financial information would enhance strategic planning by providing an understanding of which products or services yield the most profits and which ones could possibly warrant reconfiguration or termination.

            In the context of my aspired-to role, the use of costing data would increase my efficiency in designing and executing sound business strategies. Evaluating the cost of the services provided and developed helps to control the cost of each, and gives the organisation a competitive edge (Artiach, 2023). This information can also help to improve the performance management by the use of realistic financial goals and by assessing the organization’s performance against those goals (Artiach, 2023). Also, accurate costing makes it possible for firms to define areas that require improvement as well as innovation, therefore enhancing the general operation efficiency and effectiveness.

            Nevertheless, there are certain situations where costing is not incorporated appropriately or maybe can be incorporated more suitably. One of the problems that can be encountered in some organizations is a vague identification of indirect costs, which results in distortion of the financial information and proper decision-making. For instance, it is possible to fail in assigning the indirect costs appropriately in the determination of the real cost of the product or service that is being offered in the market or sector hence coming up with wrong prices that cannot meet all the accrued expenses. Furthermore, implementing only the traditional cost allocating techniques without incorporating contemporary methods like the activity-based costing might prevent the realization of comprehensive and accurate financial information. Hence by implementing improved and relatively detailed methods of costing, organizational performances and strategic plans and resolutions can be enhanced.

References:

ARTIACH, J. M. (2023).  COST ACCOUNTING.  https://files.thesaurus.ie.edu/cost-accounting(4).pdf

Cost Benefit Analysis

Option 1

As we discovered this week from our readings and video’s, not all cost-benefit decisions can be made from strictly financial data. Thinking about a project you have worked on or proposed, or a project which you feel is critical in your company or community, give an example of a non-financial metric which should be considered and why you think that non-financial metric should result in the approval of the project.

- OR -

Option 2

If you selected Option 1, in the Week 6 Discussion Question, briefly restate your New Product Development initiative. You are now at the stage where a Cost-Benefit Analysis is needed to prepare for the final presentation to management. There are multiples metrics you could use to quantify the benefit of your proposal (incremental sales, nominal payback, discounted payback, NPV and IRR). Choose the one that you feel is most crucial and would best help Management see the value in your proposal. Explain what the metric shows and then discuss how you would go about gathering the data and calculating this for your new initiative (and, if you have already done this in real life, share what you did and what response you got from Management).

Option 2

Consider your current organization, describe how costing is used or could be used to better understand the financial breakdown of products and/or services delivered. Would this information support you in your current role and/or aspired-to role? Have you seen instances where costing is not used effectively or could be better leveraged?

            Costing is one of the rudimentary approaches used to examine the cost distribution of products and services provided within an organization. It entails determination of total cost that is incurred in the provision of goods or service, and may consist of immediate costs such as raw materials and manpower, and the indirect costs which may be hidden and may include administrative expenses (Artiach, 2023). When these costs are properly incurred and allocated then the exact profit made by the organization is reflected in each product or service that is offered. This is important as it helps in decision making especially the pricing of the products, spotting any areas that can be cut on cost and hence improving efficiency. In my current position, this specific financial information would enhance strategic planning by providing an understanding of which products or services yield the most profits and which ones could possibly warrant reconfiguration or termination.

            In the context of my aspired-to role, the use of costing data would increase my efficiency in designing and executing sound business strategies. Evaluating the cost of the services provided and developed helps to control the cost of each, and gives the organisation a competitive edge (Artiach, 2023). This information can also help to improve the performance management by the use of realistic financial goals and by assessing the organization’s performance against those goals (Artiach, 2023). Also, accurate costing makes it possible for firms to define areas that require improvement as well as innovation, therefore enhancing the general operation efficiency and effectiveness.

            Nevertheless, there are certain situations where costing is not incorporated appropriately or maybe can be incorporated more suitably. One of the problems that can be encountered in some organizations is a vague identification of indirect costs, which results in distortion of the financial information and proper decision-making. For instance, it is possible to fail in assigning the indirect costs appropriately in the determination of the real cost of the product or service that is being offered in the market or sector hence coming up with wrong prices that cannot meet all the accrued expenses. Furthermore, implementing only the traditional cost allocating techniques without incorporating contemporary methods like the activity-based costing might prevent the realization of comprehensive and accurate financial information. Hence by implementing improved and relatively detailed methods of costing, organizational performances and strategic plans and resolutions can be enhanced.

References:

ARTIACH, J. M. (2023).  COST ACCOUNTING.  https://files.thesaurus.ie.edu/cost-accounting(4).pdf