Week 7 Arhh.. & Chapter 6

Seriously where is the time going and how do I manage it better...

This chapter about cost and cost objective was fun.... restating has been interesting experience.

Below is my KCQ's its longer that usual... I am finding this subject takes me away on tangents of thoughts that are not at all directed to accounting and much of the learning I am having is far more relevant to my own organisation and person choices around decision making than the unit its self. There is so many functions of blogging I don't know skill wise how to do and the time restraints on getting the information needed and finalising assessment doesn't allow for the inquisitiveness I would normally devote.

Chapter 6 KCQ's

This chapter has helped inform the complexities of management and the directions that decisions made have far reaching impact on costings, and the allocation of the purpose of the costing.

Cost objects.

The assignment of cost to the cost objectives or areas in which the cost actually relates and the direct impact of this decision making of management closed so gaps of understanding for me. While I knew about costs this additional part of management decision on the allocation and distribution of cost objectives was a blurry concept for me in the past. It intuitively made sense, in the past however this chapter gave weight to the understanding. It is critical that the true nature of costs are actualised to allow managers to better depict decision making. This is to minimise the risks associated with selective perceptions such as escalation of commitment (Robbins & Judge, 2017). This was also spoken about when referred to the opening of Masters store across Australia Mentioned in the study guide. Cost objectives is to measure the true contribution of the value made and growth obtained by the use of the resources.

Cost of Products

My company RPM Global is a service firm that packages software as products. In this way they can more accurately assign costs to the various products of service they create. The writing on direct and indirect cost were straight forward. I realise that much of it is decision making on the indirect or period costs.

Apportioning indirect cost.

This is about understanding the judgement and assumptions embedded in the allocation of indirect costs. Interesting how period cost can be broken into predetermined overhead absorption rate, to break down to individual products. I can see how this process could become difficult shifting between departments on how each department manger requires the cooperation of other departments. Also more senior mangers diffusing costs onto other parts putting pressure on middle an lower managers to balance accounts. I have seen this in the workplace the stress to bring in a budget with costs that are shifted around to best reflect cost objectives.

Activity based costing was more interesting to examine as the increase and decrease of cost shift with the changes in product production. With service industries that put a lot of energy into a product that is packaged and has not further real cost associated due to the fact it is consumable rather than tangible item that needs warehousing, I think allows greater flexibility in the cost allocation. The other part in the choices is for managers how much additional time they will ask to be allocated as reporting requires full costing measures but other costing figures to be assigned within the accounting to have manipulation of decision making.

Cost Changes

Knowing the breaking point as to where the costs shifts to and the variable reasons to change the decision making given new information is a skill and ability to measure competing risks. I was in a church that was very financial for many years and their was a noticeable shift and the treasurer pointed out the clear decreasing numbers. Big decisions was needed. Over more than a 12 months no decision was made until the was literally no more money to pay the wages in the account. It was the most frustrating to know that the decision that was required and no one person would make it, even after much questioning as to why. They were so selective in the idea that they would be recued by a win fall. I watched another friend who owned a business it was clear that the local downturn has dramatically affected their business. The good old days were unlikely to come back, 2 years later they filed for bankruptcy. Emotionally wrecked but, also personal relieved not realising the emotional impact of carrying the burden that needed a decision way to late. The ramifications are far reaching. Good management requires timely decision making. This addressed well fixed cost and variable costs that are attached to product growth as in sell more chocolate need more chocolate making ingredients. What about the known increases in cost that continue to grow over time such as insurance and electricity that don’t have a link to product use? How does one manage the future unknown cost well? Management comes with risk taking and knowing break points for decision making is a valuable when done well but is rather subjective. The other part for me personally as I have begun an organisation is decision making that I know has far reaching into the future and the true light of the choice will only be really known in the future. I wonder where in costing the building of investments capital of other projects sits? The relationship between fixed and variable costs particular in higher capital intensive business are inherently risky that is why I think service style industries are possibly more attractive in profitability that just widget making style business. The value given vs cost to the firm. I should re read my company now to look for the assumptions of costing that I missed not knowing this information to look for the evidence of further cost relationship assumptions.

Reference List

Robbins, S. Judge, T. (2017) Organisational Behaviour, Person Education Inc