- Level: University Degree
- Subject: Business and Administrative studies
- Word count: 1044
The purpose of this paper is to address the notion of value costing for the 21st century organizations. I will begin by defining and explaining value costing. From there I will then provide my opinion on whether or not I agree with the notion of value cos
Extracts from this document...
Introduction
Case 2 A Revised Income Statement, The Contribution Margin Approach By Robert Kimble ACC 501 Dr. Tara Murphy September 12, 2011 The purpose of this paper is to address the notion of value costing for the 21st century organizations. I will begin by defining and explaining value costing. From there I will then provide my opinion on whether or not I agree with the notion of value costing. Finally I will discuss cost-volume-profit analysis and discuss whether or not it is still relevant in the 21st century business organization. Cost value is the analysis of different divisions or business units of a firm on the basis of their opportunity cost and economic rent. Cost value profit (CVP) analysis is one of the most powerful tools that managers have at their command (Accounting for Management, 2011). It helps them understand the relationship between cost, value and profit in an organization. When it comes down to it the real objective of cost value is to determine what company/ business is worth keeping and which is not. Cost analysis is an important component of all economic evaluation techniques, especially when it comes to planning and self-assessment. ...read more.
Middle
In the 21st century, all the organizations want to expand their business and capture the opportunities (Baggaley and Maskell, 2003). The notion of value costing for the 21st century organizations is vital in that it provides the information necessary for businesses to know whether or not they are gaining a profit based on the numbers/ figures that they are or are not bringing in. The various costing methods also play an important role because it allows those in charge vital to understand the profitability from the various projects, which enables the Management to make decisions in the manner they feel is most appropriate, in order for them to achieve a profit. Now, do I agree with the notion of value costing for the 21st Century organizations? Yes, I do agree with the notion of value costing for the 21 Century organizations for the simple fact that it has worked for others in the past and it still works for many today. Earlier it was defined that value costing is the analysis of different divisions or business units of a firm on the basis of their opportunity cost and economic rent. ...read more.
Conclusion
direct overheads such as wages, rent, business rates etc. A business with more than one "outlet" would then have two or more "outlets" contributing towards the admin overheads (and hopefully) overall profit for the entire business, this is industry specific, because without a profit then your business will cease to exist. Is CVP analysis still relevant in the 21st Century business organization? I believe so, because as stated earlier, what it all comes down to is a profit and keeping your business/ organization afloat. CVP analysis is one of the most powerful tools that managers have at their beckon call. It helps them to understand the relationships between all three factions; cost, volume and profit and it is with this understanding that managers can decide how to continue conducting their business. They decide what to manufacture, buy, sell or even what price to sell at. According to authors, Yunker and Yunker, 'CVP assumes the following: Constant sales price; constant variable cost per unit; Constant total fixed cost; constant sales mix; Units sold equal units produced' (Yunker and Yunker, 2003). Looking at the aforementioned statement then in the end when you consider all these factors and place each within its' proper context then you will agree that CVP analysis is still relevant in the 21st Century. ...read more.
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