Question

Discussion: you will assume the role of an entrepreneur. You will create a fictional organization and consider some costing concepts as you create it.

First, compose a full paragraph that describes the organization. Be sure to include the name of your company, the product (or products) or services that it provides, and who your intended customer base would be. Think strategically about what you can offer that a customer base would see as valuable, and what basic business model would help you to be most profitable.

1.Once you have outlined the company and its goals, please consider and answer the following questions:

2.Identify at least one fixed and one variable cost you will have in producing your product(s) or service(s).

3.Identify at least one potential sunk cost.

4.Identify a potential relevant cost decision you would have to make and explain which aspects of the decision might be relevant and which ones would not be relevant.

5. Explain how opportunity costs could apply to one or more of your products and/or services.

6. Identify at least one outsourcing decision in which you would “buy” and at least one outsourcing decision in which you would “make." Keep in mind these can be not only production issues but issues related to how your business is structured. Explain the analysis you would use in arriving at an item you would “buy” and the analysis you would use in arriving at an item you would “make.”

Your initial posting should be between 300 to 400 words and use a minimum of three sources (one of which may be the textbook). Cite your sources and references using APA format (a tutorial is provided in the Class Tutorials Section of the course).

You will use two items to complete Part II. First, go back and review the company that you created for the Discussion. Think strategically about the company, its products and services, and issues related to cost. Then, review the case study on Boeing (http://web.mit.edu/ctpid/lara/pdfs/abccasestudy.pdf) to understand how activity-based costing and activity-based management can impact managerial decisions within firms. Once you have completed these two activities, respond to the following questions in the space provided below. You should use source materials, citations AND references (in APA format) to help support your answers. Generally, 3-5 sources (or more) should be used. Remember to double space your answers as well.

Topic A (10 points) – Using the company you created in Module 2, if you were to conduct an ABCM pilot in the organization, then which stakeholders would be most likely to support the project? Which stakeholders would find the project threatening or problematic? Why?

Answer:

Topic B (10 points) – Do you believe that make-buy decisions would be better, worse, or no different with an ABCM system in place? Why do you reach this conclusion?

Answer:

Topic C (10 points) – Do you believe that continuous improvement efforts would be strengthened by such a system? Why or why not?

Answer:

Topic D (10 points) – Do you have enough evidence here to decide whether you would support or oppose an ABCM initiative within your company? If so, then explain. If not, then what additional data or information would you need?

Answer:

References: (10 points)

Answer 1

Solution:

The organization name is ABC Accounting Services Private Limited. The company is providing the various accounting services like quick books, GST preparation, Preparation of financial statement, expert opinion on accounting etc. The target customer base for the same is small firms, individuals who are facing problems at the time of making their financial statement and accounting calculation and various returns.

1. The variable cost varies with the production. So in the instant case one variable cost is salary of staff which is depending upon the no of work they performed. In other hand fixed cost remain fixed. The example of the fixed cost is rent of the office.
2. The potential sunk cost is such cost which has no relevance at the time of making any decision. This type of cost not considered at the time of decision making. In the given case the potential sunk cost is cost of purchase of various accounting software.
3. At the time of decision making relevant costing plays an important role and to calculate the relevant cost only the item which are relevant with the production are considered. All other items like fixed cost and sunk cost are ignored.
4. Opportunity cost is one of the most important element of the cost management which plays an important role at the time of making any decision related to the production. Opportunity cost refers to next better opportunity which is lost due to accept the present. In the instant case the opportunity cost of auditing services are lost due to start up the business of accounting firm. So the loss of Auditing Services is the opportunity cost.
5. The decision of buy or make is depending upon the analysis of the cost and understanding the availability of the resources. The comparative analysis of the make and buy decision is made and the decision of buy or make would be taken according with the result of the same. In the instant the preparation of tax returns is outsourced due to scarcity of the resources.

References:

Aman, A. H. M., Hashim, A. H. A., Abdullah, A., Ramli, H. A. M., & Islam, S. (2016). Advance Signaling Cost for Multicast Fast Reroute Proxy Mobility Management. Indian Journal of Science and Technology, 9(25).

Bichou, K. (2015). The ISPS code and the cost of port compliance: an initial logistics and supply chain framework for port security assessment and management. In Port Management (pp. 109-137). Palgrave Macmillan, London.

Cooper, R. (2017). Supply chain development for the lean enterprise: interorganizational cost management. Routledge.

Moore, S. M., Schiffman, R., Waldrop?Valverde, D., Redeker, N. S., McCloskey, D. J., Kim, M. T., ... & Barton, D. (2016). Recommendations of common data elements to advance the science of self?management of chronic conditions. Journal of Nursing Scholarship, 48(5), 437-447.