Question 1
Cost drivers are the factors that contribute to the production of commodities in firms. In the service industry, they include the time used in the manufacture of goods or provision of services. Cost drivers may also be the billable time for cost labor utilized for a particular job. Notably, cost drivers keep changing every time as therefore one has to settle on the present cost drivers as a way to be able to check on the right price driver.
Ng, I. C., Maull, R., & Yip, N. (2009). Outcome-based contracts as a driver for systems thinking and service-dominant logic in service science: Evidence from the defence industry. European Management Journal , 27 (6), 377-387.
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Yee, R. W., Yeung, A. C., & Cheng, T. E. (2010). An empirical study of employee loyalty, service quality and firm performance in the service industry. International Journal of Production Economics , 124 (1), 109-120.
Question 2
Process costing is the most appropriate measure to be used at the hospital since unlike job costing, which utilizes costs attributed to specific units, has costs involving same goods from each other. Hospitals are very complex areas that provide services of different nature but which can be charged in a related way. Therefore, process costing is best for usage within the hospital setting.
van den Hout, W. B., Peul, W. C., Koes, B. W., Brand, R., Kievit, J., & Thomeer, R. T. (2008). Prolonged conservative care versus early surgery in patients with sciatica from lumbar disc herniation: cost utility analysis alongside a randomised controlled trial. bmj , 336 (7657), 1351-1354.
Shander, A., Hofmann, A., Ozawa, S., Theusinger, O. M., Gombotz, H., & Spahn, D. R. (2010). Activity‐based costs of blood transfusions in surgical patients at four hospitals. Transfusion , 50 (4), 753-765.
Question 3
Activity-based costs are used on the economic principle of prospective benefits. Costs are not just realized if there is no activity related to it is conducted. Therefore, I agree with this statement, because it asserts that price should be action based. It also serves as a motivating factor for the performer of the measure. Activity based costing links the business to its cost applied. This enables the company and the accountant’s fair time to make major decisions.
Kaplan, R., & Anderson, S. R. (2013). Time-driven activity-based costing: a simpler and more powerful path to higher profits . Harvard business press.
Question 4
Economic value added (EVA), is a measure that is used by companies for their financial wealth, based on their remaining property and usually after a reduction of costs from profits. The EVA method seeks to compensate the managers based on their economic benefits realized from the company’s profits, and I find it quite favorable for this reason. Another way to motivate the managers might be to provide a choice of assignments.
Das, B., & Pramanik, A. K. (Eds.). (2009). Economic value added . Deep and Deep Publications.
Schawel, C., & Billing, F. (2011). Economic Value Added. In Top 100 Management Tools (pp. 73-74). Gabler.
Question 5
I agree with the statement that’s been posed herein. Selling products at split off requires that the managers consider additional costs that may be related since the product now is produced separately. Additionally processing the goods further gives it a new price effect that has to adhere. Selling at the split off might have been arrived at on finding that production cost was lower.
Tsai, W. H., Lai, C. W., & Chang, J. C. (2007). An algorithm for optimizing joint products decision based on the Theory of Constraints. International Journal of Production Research , 45 (15), 3421-3437.
Question 6 and 7
I agree with the statement that’s been hereby made, and this is because managers are always required to act on policies that will maximize profit making which is the objective of the shareholders of the company. Therefore, it is paramount for the manager to consider cost effect in production or those decisions that enable the realization of high operating income for the enterprise.
Gantchev, N. (2013). The costs of shareholder activism: Evidence from a sequential decision model. Journal of Financial Economics , 107 (3), 610-631.
Question 8
A company has to, first, understand the meaning of both cost occurrence and locked costs as a measure by which it could make decisions. Cost occurrence happens when the exchange of goods is based on the bargain before it can be exchanged. Whereas in the case of a locked price, a person has to meet the cost of the commodity started first, before they can then receive the goods from the seller. For these reasons, it is important for companies to distinguish between the two.
Tong, V. C., & Chow, D. S. (2013). A study of student participation and nonparticipation in prelecture electronic surveys. British Journal of Educational Technology , 44 (5), 869-880.
Question 9
Finally, during the lesson, I have learned that the most important aspect of costing is one, which enables businesses to realize a high profit or minimize costs in its production of goods or services. Therefore, the best policies for the companies are those that allow them to have significant profits by employing the least resources. Costing all the way from the production of the commodity helps the company in realizing its benefits as well as being able to structure its worker's payment. Costs also make it possible for the company to secure a market segment where it can acquire raw materials and process finished goods. Furthermore costing is used by most of the managers to make major decisions, which may affect product prices, raw materials, workers, and marketing structures of the company.
Swarr, T. E., Hunkeler, D., Klöpffer, W., Pesonen, H. L., Ciroth, A., Brent, A. C., & Pagan, R. (2011). Environmental life-cycle costing: a code of practice.
Al-Omiri, M., & Drury, C. (2007). A survey of factors influencing the choice of product costing systems in UK organizations. Management accounting research , 18 (4), 399-424.
Chen, Z., & Wang, L. (2007). A generic activity-dictionary-based method for product costing in mass customization. Journal of Manufacturing Technology Management , 18 (6), 678-700.
