Company Description Alcoa is an American manufacturing organisation which deals in producing primary aluminium and fabricated aluminium. Furthermore, the organisation is also known as one of the biggest drillers of bauxite and refiner of alumina in an international context. The primary products of Alcoa are divided into two major categories which are aluminium products and non-aluminium products. Aluminium products of Alcoa comprise alumina, primary metals, flat-rolled products and engineered products and solutions. On the other hand, non-aluminium products of Alcoa include industrial fastenings, precision casting and aerospace products (Alcoa Inc, 2013). Impact of Changes in the Variable Cost / Fixed Cost Structure of Alcoa on Cost- Volume Profit Analysis Decisions by Managers Cost-Volume-Profit (CVP) analysis is often argued to assist in taking decisions about business operations for any manufacturing organisation. It is applied as a method of inspecting the link between fixed and variable expenses with respect to number of manufacturing units and related profits. In order to use the CVP analysis, there is need for analysing the business operations obtaining an unambiguous understanding of fixed expenses incurred by the business in comparison to variable expenses. Therefore, any kind of changes in the fixed expense and variable expenses can impact on CVP analysis and product manufacturing decisions of a particular business like Alcoa. For instance, through CVP analysis, Alcoa can determine the cost of its products more accurately than the traditional method. As a CVP analysis develops a clear understanding of the fixed and variable costs incurred by a manufacturing firm, accountants and managers are likely to gain better control on the total costs of any product comprising certain fixed and variable components. With a better control on the total cost, these components can be used in order to clarify variations in product price as well as variations in expenses. As the number of quantity produced increases, per unit variable and fixed expenses are quite likely to decrease to a certain extent. Hence, per unit expenses will also reduce with respect to a decline in fixed and variable expenses rewarding the company with greater opportunity to serve its customers either with increased supply quantity or at a competitive price maintaining its profitability. Stating precisely, by understanding the fixed and variable expenses structure of Alcoa, the managers of the organisation can determine the level to which minimisation of prices of products would not compromise the profit gain per unit (Wiley, 2004). Analysis of the Current Cost System of Alcoa There are two major types of costing system which can be used by an organisation namely traditional costing system and Activity Based Costing (ABC) system. In this context, it has been observed that Alcoa uses the ABC costing system in its business operations for determining the cost of products as well as for framing its budgeting strategies (Krishnan, 2006). ABC system divides every manufacturing activity explicitly and determines the portion of overhead expenses which are used for manufacturing one unit of a product. Contextually, the ABC system makes possible for Alcoa to establish more comprehensive factory management structures. With an apparent view of cost of products grounded on ABC system, the managers of Alcoa are
Cost Accounting and Management Decisions Introduction The purpose of this essay is to evaluate the cost accounting system of an US based manufacturing organisation, i.e. Alcoa. The paper further assesses the cost structure of the company through the application of a cost-volume analysis…
When implementing the ABC system, costs are allocated to specific activities in operating a business such as planning, engineering, or manufacturing of products. With ABC, costs are assumed to be are variable and that managers tend to overlook the increasing fixed costs because they feel they do not need to monitor them.
These branches play different roles, but have the same aim of meeting the objectives of accounting. It is also important to note that three branches are much different from each other regardless of the fact that they are all branches of accounting (Gupta 2008).
Cost Accounting 1. Absorption and Marginal costing This paper will critically evaluate the costing method used by different management systems by assessing their convenience in terms of advantages and their shortfalls. The common costing methods used in cost accounting include absorption costing and marginal costing.
The Classic Products Limited (CPL) has been following marginal costing system for accounting its cost information and related decision making. The concept of marginal costing is highly relevant for manufacturing concerns where huge amount has been spent for fixed capital investment.
Financial Accounting is concerned with development of financial statements of the company to be used by stakeholders like customers, management, employees, shareholders, regulatory agencies, creditors and debtors etc.
The scope of financial accounting is usually external to the organization where stakeholders analyze the financial health of the company through its financial statements like balance sheet, income statement, statement of retained earnings and cash flow statement (MIT Open Courseware, 2004).
ded carbonates through effective sustainability process designs..
The Group has made significant investment across its procurement, production and quality control, customer management, category marketing and distribution functions with the aim of being able to deliver a high quality product at any time or place of customer interest.
Management by exception is the practice of concentrating on areas not operating as anticipated and giving less attention to areas operating as anticipated. Managers use information from variances when planning how to allocate their efforts. Areas with sizeable variances
They play different roles in the process of satisfying the needs of the stakeholders of a particular organization. This essay attempts to provide a clear understanding regarding the differences that exist between the management