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General Electric's Allocation of Costs - Essay Example

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General Electric’s Allocation Of Costs Introduction Cost allocation is the most important task in any organization, as this task ensures that all the relevant heads get the relevant budgets for a proper allocation of resources. The purpose of cost allocation is for many reasons…
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General Electrics Allocation of Costs
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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 organization, it will also justify costs of various expenditures as these would than be used by the auditors to audit and overlook all the managerial activities so that there are no issues arising at General Electric. Also, in order to justify cost plus pricing, General electric is involved in cost allocations and in strengthening the cost of the procedure. They are also involved in decision making with regards to joint costs, re allocation of costs from one department to another department as need arises. GE makes sure that the allocated costs are fair, workable, and rational and according to the needs of what is required by all the departments. Allocating costs for the handling and managing of different activities have to be simplified in various ways, this simplification will ensure that the targets for the companies are achieved and that the targets achieved should give maximum profitability for the company. The products of General electrics include lights, bulbs etc all go through manufacturing process to the finished stage where it has to be marketed and sold in the market. So it is important that the manufacturing sector gets the required budget for the manufacturing through their raw materials, the proper supply chain processes and than the marketing should also get all the required budgets to handle proper marketing and selling for the company. The budget that is circulated in the company, managers can't surpass that and hence this is the only way through which employees can manage the way they negotiate in their dealings to conduct more cheaper and inexpensive work. Departmental budgets and costs are a good way to keep the company and all department effective and informed about how they get their departments to work on these lines and hence they adapt themselves to work in a culture which motivates all the employees, justifies all the costs that are accrued and also it justifies the way they make their expenditures. All the departments' accrues costs, but the heaviest department is marketing, as all the marketing activities are very expensive and they are conducted on a large scale. The activities that are conducted on a large scale employs that bigger expenses would be done to meet the expectations of their competitors. Like if GE wants to make any advertisement, it will accrue cost, if they want to get some marketing done through sponsorships and other such related stuff than it is also expensive. So it's important to track all the activities and to see it's impact on sales. If sales are not improving than there's no point of all these heavy ativties and hence it is important to do all but keeping in track of the sales situation. As with inflation the cost of doing business is also increasing. The raw materials are expensive, the duty on these raw materials is also expensive and the way to procure them has also become very expensive. So at every stage proper analysis has to be done and controlled budgets have to be allocated with all the departments to keep a proper check and balance on these situations for ... Read More
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