Average Costs and Variable Costs as Performance Measures

Average Costs and Variable Costs as Performance Measures Essay example
Ph.D.
Essay
Finance & Accounting
Pages 3 (753 words)
Download 0
According to Pride and Kapoor,Cost Accounting involves such processes as the collection, analysis and evaluation of certain courses of action in order to offer invaluable advice to the management on the best way to act regarding cost efficiency versus capability…

Introduction

Through cost accounting, the management can understand the management needs and in this regard control the current operations as they plan. Normally, in every accounting environment be it within an organization or the government institutions, there are costs of production that include the fixed and the variable costs (Drury, 2008). While fixed costs do not vary with the output like rent, insurance, and depreciation, variable costs as their name suggest, are under constant fluctuation depending on the output for example fuel cost, labor costs, and cost of materials. Average costs on the other hand are obtained by dividing the costs by the output (Pride, Hughes & Kapoor, 2012). Although the average costs and the variable costs may at times be unpredictable, managements can make use of the costs to measure the performance of the organization as well as the managers. The manager of the manufacturing unit in a company is responsible for the costs of the manufacturing unit (Drury, 2008). In this regard, quality, timely delivery, and cost measures are used to reward the manager’s performance. However, there are problematic areas associated with the process of deciding whether to evaluate the manager of the manufacturing unit by average cost per unit or the variable cost per unit (Sharan, 2009). ...
Download paper
Not exactly what you need?

Related papers

Airbus, a leading manufacturing airline company: Financial Benefits & Costs
This was done in 1988 by sprucing the supervisory board of the company, the creation of the executive board, and the establishment of the chief executive position. Despite of all that, Airbus company still captured the a huge share in the aircraft commercial market which was steadily growing and even won several contracts with the Air Canada and the Canadian Airlines International in the late…
Reallocation of Costs in Information Technology
Process of Allocation of IT Costs When information technology is implemented within organizations, it is important to identify how the costs of this investment will be allocated within the books. Costs for any other investment for instance, physical assets (land, building, furniture, etc.) are easy to understand and allocate. However, allocation for information technology assets and expenses is…
General Electric's Allocation of Costs
General Electric and Cost Allocations At General Electric’s managers are very much concerned about the allocation of costs as these allocations are required for the proper delegation of resources and cost to the respective department. Manager at GE realize that the cost allocation to different divisions, plants, departments, contracts and/ or products will result in increased motivation for the…
Analyzing Direct Costs
And lastly, Quality Control and Testing has a labor rate of $10.00. When multiplied by the projected 500 labor hours this give you a total of $5,000. Adding the totals of these five jobs together we have $3,625 + $16,400 + $11,250 + $6,750 + $5,000, which is an estimated total labor cost of 43,025. I then divided this total by the total projected labor hours of 5000 to come up with the weighted…
OVERHEAD COSTS
The cost of direct labor, direct material and manufacturing overhead must allocate to each and every unit produced. This is done to value the inventory and the costs of goods manufactured, and then report them according to the general accounting principles. Manufacturing overhead may include costs like electricity which is used to operate the factory equipment, depreciation of factory equipment,…
Potential Costs and benefits to Henley Manufacturing
In this case of Henley Manufacturing, by announcing its sales and earnings goals at the shareholders’ meeting, it is likely to undergo the following in terms of costs and benefits. Costs for disclosure: An announcement of sales increase by 15% and net income by 20% to the shareholders may be deemed by them as a source for pay increase demand by the managers and other employees. As such, the…
Planning and Controlling Direct Labor Costs
In the current competitive business environment, companies that cannot afford to charge low prices on their products are likely to be excluded from markets. In this regard, cost cutting allows firms to employ low pricing strategy and still make profits (Burns, Quinn, Warren & Oliveira, 2013). Business costs come in many forms. As noted by Burn et al. (2013), manufacturing companies incur expenses…