Acc 550 - Cost Accounting - Final Project
ybg318
quantitative_analysis_0_0-2.docxRunning head: Quantitative analysis 1
Quantitative analysis 7
Quantitative analysis
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Institution
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Cost – Volume – Profit Analysis
The CVP analysis of the firm ensures that the firm makes some positive revenue before tax is imposed on the profit margin. It is essential that the firm seeks ways through which it can cut on the costs of production so as to increase the performance of the company in the economy. It helps the management to make the short-term economic plans that will be essential in the future performance of the company. With the availability of the info on the performance of the company, it will enable the management of the firm to make the best decisions that will spur the company to realize the key goals of the firm. The short-term economic goals of the firm will be easily realized with the help of the company’s CVP analysis.
The analysis also breakdowns various decisions that need to be taken so as to make the operations in the firm successful. Breaking down the events can lead to an effective manner through which the business activities can be implemented in the firm to make it a success. The future survival of the firm is solely dependent on the proper implementation of the ideas as per the findings of the CVP analysis. The break-even point for the company suggests that it is essential that the firm cuts on the costs of production so as to improve the revenue realized by the company. The break-even revenue of the company suggests that the company does not struggle to meet its key objectives in the economy. Also, the break-even quantity of the firm is essential in the production of the products that the firm meets their current demand in the market.
The implications that are associated with the firm proves that the info obtained from the CVP analysis need to be properly analyzed by the managers before making any vital decision. Most of the results are based on certainties that cannot be implemented at the face value. It is crucial that the managers of the firm conduct further consultations with the employees and key stakeholders to confirm the results of the CVP analysis. The managers need to be vigilant so that they do not rush into making the wrong decisions that will not help in the development of the company. The approximation of the decisions to be made makes the top management of the company to made critical decisions after consulting the other experts in the field (Albrecht, 2007).
The employees need to be interviewed so as to ensure that the results provided by the CVP analysis are in compliance with the events that are unfolding in the society. It suggests the shortcomings that the firm and its management can find themselves in the event that they blindly implement the results as provided by the analysis. In the firm, it is crucial that the analysis is made for each product so as to ensure that the outcomes are precise and have the minimal error possible. The investigations are important in the process of making the management of the company make the best-informed decision after reviewing the findings of the analysis. The management of the firm needs to be well-informed on the events that unfold in the companies to help them realize the key objectives of the firm and not to over depend on the results of the analysis to make the decisions in the firm.
Inventory Management and Benchmarking
The management of the firm normally uses the optimal cost allocation info to make the best decision regarding the ways through which the firm can realize its key objectives in the economy. It helps to explain the major reasons as to why the firm need to meet certain costs of production and why it should cut on other costs of production. The firm always cut on the costs of production that are not viable in meeting the key objectives of the company. The costs of production that will lead to the increase in the net revenue of the firm need to be increased so as to help the firm to expand its operations in the economy. It equally helps to find the best ways through which the firm can allocate the central costs in the company. It provides the most effective way through which the firm can calculate its activity-based costs for the products.
The just-in-time (JIT) inventory system also helps the firm to manage the inventory systems in the company. It helps to fasten the ways through which the company makes its sales to the consumers in the market. It drastically reduces the time take to supply the products to the buyers. Through the system, the company increases the number of sales that it makes on a daily basis, and this plays a major in increasing the net revenue realized by the firm by the end of every financial year in the economy. The main disadvantage of the system is that it provides too much info to the clients, and it could be detrimental (Muller, 2011). The info can be accessed with the hackers who will in turn try to seek more info from the company and lead to the emergence of problems in the ways through which the activities of the firm are achieved.
Benchmarking is very crucial in the process of improving the performance of the company. It is because it does show the level of effectiveness of the product in the company. Through benchmarking, the product’s quality can be improved so as to make it perform better in the market. It suggests various ways through which the firm can use to make the product better and appealing to the clients in the society. It is vital that the company implements the suggested ways so as to improve the performance of the product in the market that will consequently lead to the improvement of the revenue recorded by the firm.
The management of the firm should adopt the process benchmarking as it is the best way through which the firm will improve the quality of its products. Improving the quality of the products implies that there will be more clients who purchase the products of the firm. The increase in the volume of sales made by the firm will lead to the increase in the total revenue realized by the firm. It will make the firm expand its operations in the economy. The proper implementation of process benchmarking will not only retain the clients that already purchase the firm’s products, but it will also attract more new clients into the firm. The products manufactured by the firm will become more competent in the economy.
Alternative Costing Method
Since the company is expanding its operations, it would be prudent to consider an alternative costing method so as to improve its benefits from the operations. The best alternative costing method that the firm needs to implement properly processes costing. It implies the accumulation of labor, material, and overhead costs realized by the firm across all the departments and allocated to a single unit. It will work more effectively as the firm mainly deals in the production of the similar product, umbrellas in the economy. The importance of applying the technique is because it is very easy to implement.
The process provides a more accurate cost per unit operations in the firm. The managers will find it easy to make the informed decisions in the firm. It is the right of the managers to make the decisions that will lead to the improvement in the performance of the firm. Through this process, the managers are well placed to make the best-informed decisions in the economy. The practice is not only accurate but also reliable in making the best decisions in the market (Rich, 2012).
The increment in the volume of sales as a result of the adoption of the method has two main advantages to the firm. One, most of the info recorded in the company will be more accurate as opposed to when the process had not been implemented. The existence of a more accurate info will help the firm to make the best decisions that will lead to the expansion of the firm as a result of the increase in the profits margin recorded in the operations of the firm. Also, the existence of more accurate info will strengthen the beliefs that the management of the firm has regarding the operations of the firm. It is essential that the data obtained from the operations of the firm be accurate so as to improve the recital of the company in the market.
Secondly, the application of the technique will increase the volume of sales recorded by the firm. It suggests that the consumers will purchase more of the products made by the firm in the market. The increase in the volume of sales will lead to the increase in the net revenue realized by the firm. It is a situation that makes the net profits made by the company to increase tremendously. Also, the firm will expand its operations in the economy and lead to the development of the industry. The existence of more quality umbrellas made by the firm in comparison to what the competent firms are producing will make more clients to come and purchase the product from the firm. It is for this purpose as to why it is essential that the system is fully implemented in the firm. It will spur the performance of the company and make it develop in its operations in the market.
References
Albrecht, W. S. (2007). Accounting, concepts & applications. Mason, Ohio: Thomson/South-Western.
Muller, M. (2011). Essentials of inventory management. New York: AMACOM.
Rich, J. S. (2012). Cornerstones of Financial & managerial accounting. Mason, OH: South-Western/Cengage Learning.
