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Running Head: MANAGEMENT ACCOUNTING

Management Accounting

Answer No. 2

The organization West Islands is looking forward to find out whether it should move forward with in sourcing of its products or whether it should work towards outsourcing its products. There are certain advantages and disadvantages of both the options available to the organization. In sourcing is a method in which the organization is engaged in manufacturing the products within the organization and works towards achievement of its targets by way of making the products within the organization.

Pros of In-sourcing

First benefit of in-sourcing is that the organization will be in the position to make sure that they work for the purpose of having control within the organization. When a particular project of the organization is initiated within the organization then, the owner and employees have complete control over it. Second advantage of In-sourcing is that the organization may end up reducing the costs incurred by it in production of the products.

Cons of In-sourcing

First problem in relation to In-sourcing is that the organization will not be in the position to make sure that it continues with same level of employees (Coombs, Hoobs & Jenkins, 2005). The number of employees within the organization will be required to increase due to the situation of In-sourcing. In case of In-sourcing, if the organization is required to establish a new department then, costs to be incurred by it will be comparatively higher.

Pros of Outsourcing

First advantage of outsourcing is that the organization will be in the position to make sure that it works towards focusing on its main activities in a proper manner. Second advantage of outsourcing is that the organization might be in the position to make sure that it reduces the level of cost to a certain extent if cheap labor is available to the organization in a proper manner without much issue.

Cons of Outsourcing

First problem in relation to outsourcing is that the organization will not be in the position to make sure that it works for the purpose of making sure that it has control over the activities which are outsourced. Second problem in relation to outsourcing is that that organization may have trouble regarding incurring higher level of costs if the people involved in carrying out outsourced activities do not work towards achievement of positive results.

Answer No. 3

The organization has to make sure that it sets up plans for the purpose of ensuring that it has a particular policy in place in such a manner that it reduces the disputes which might arise to it regarding the situation of decision to be made regarding outsourcing or in-sourcing to be carried out by it at a particular point of time. Regarding the policy to ensure outsourcing and in-sourcing decisions are made in a proper manner, the organization should make use of policy of comparison of costs and control.

Advantages of Policy

The policy of making comparison of cost and control will help the organization a great deal for the purpose of making sure that the organization is in the position to take the decision appropriately. The organization will also work towards achievement of targets regarding the fact that it makes use of the resources available to it in a proper manner for achieving its targets without much issue or trouble for it. This particular policy does not seem to be putting the organization in any kind of problem at any point of time.

Disadvantages of Policy

In relation to the disadvantages of policy, the organization may get into trouble if it is not in the position to work towards making proper decisions regarding determination of the cost to be incurred by it in the course of outsourcing its activities at a particular point of time in the future.

References

Coombs, H.,Hoobs, D. & Jenkins, E. (2005). Management Accounting: Principles and Applications. SAGE.