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Importance of maintenance management
Importance of maintenance management
Importance of maintenance management
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Directs costs are costs incurred by businesses that could be directly attached to units of products or services put to the market. These costs include expenses on material and labor among others that are necessary for a business to develop products or services that satisfy the needs of its customers (Clarke, 2011 p.4). Other costs incurred by a business cannot be directly attached to specific quantity of goods or services offered by the business and are called indirect costs. These costs affect the entire organization as a single unit and not to various products. These include the administrative expenses, depreciation costs and accounting costs that are affect all functions of the business. There are difficulties experienced in separating direct …show more content…
For service businesses, they would require workers offer various categories of services to clients. The kinds of employees involved are engaged in direct activities of manufacturing products or rendering services and have direct influence in the level of output of the business (Drury, 2007, p.10). These employees form direct labor force to the business the expenses incurred in compensating them are direct costs. These include salaries for operators of machines and equipment used in processing raw materials to final products. Other direct labor costs include salaries, bonuses, uniforms, insurance expenses as well as training for direct employees. In a service business such as the hospital, the health officers such as consultants, nurses and doctors that offer care to patients constitute direct costs. According to Mclaney, & Atrill (2010, p.2), direct labor cost have direct effect on price of products and profitability of the business. Employees whose activities cannot be directly attached to certain products constitute indirect labor costs and include supervisors and administrators. Direct labor cost may be converted to indirect labor cost (Duska, Duska, & Ragatz, 2011, p.22). For instance, when driver of ferrying materials to the factory is assigned responsibility to drive business managers ceases to be part of direct …show more content…
The processes are systems used by the workers to convert raw materials into final products or services. Businesses incur huge finances to buy or establish these systems and such costs have impact on the price of products. In addition, these assets could be clearly attached to specific levels of output when they run. The appliances are necessary to design output so as to meet requirements of customers and when they do not run, production targets are not attained (Lal, & Srivastava, 2009, p.6). Nevertheless, depreciation and the costs incurred in maintaining the processing systems could be clearly attached to given set of products and therefore do not make part of direct costs. Other process costs include the expenses incurred on outsourced companies that help in transforming raw materials to final products. An example is payments to malting companies that prepare malt ready for brewing purposes in large brewing companies. The payments to sub-contracted company are based on quantity of malt supplies and level of production. The expenses form part of direct costs that could be clearly attributed to processing activities (Haller, Raffournier, & Walton, 2003, p.16). The services of the subcontractor do not help in the direct processes, for instance, subcontractors offering food and restaurant services to direct process workers. The expenses involved would be regarded as indirect
Overhead based on direct labor includes the cost of the Product Development Support Center, interest expenses, and general and administrative expenses. The Product Development Support Center failed to account for hours spent on each product, which will not only complicate the product cost calculations, but also the calculation of capitalization expenses later on. The Development Support Center will be most used during the peak (i.e. most hours) time of development for each product, and hours worked will probably be the best way to divvy up the costs of the support center. The money invested in the company is being used on developing each product right now. I figured interest would best be divvied up by hours to attribute the interest expense to the product using the most of the investment. Similar to the reasons stated before general and administrative costs are going to be associated with the most prominent product, and that is best seen through hours. (Figure A)
The presentation of the material is in dollars only. Overhead is applied to products as a percent of direct labor dollar cost. Factory profit for each year is found by subtracting direct material, direct labor, and direct overhead costs from total sales. The overhead percentage is calculated at the same time budgeting and is applied as a single overhead pool throughout each model year. The consulting company used 435% of direct labor costs in 1987 for their study; the budgeted was actually 437% (OH/DL=107,954/24,682). A similar percentage applies in the following year (109890/25294=434.5%). However in the next two years, after the outsourcing of oil pans and mufflers was enacted, the allocation of overhead in...
There are several basic approaches that can be utilized when conducting economic evaluations for any new health care intervention; which can include medications that are designed for the treatment and prevention of disease and how to relate the effectiveness with the overall monetary value of the new treatment. The economic tools that can be employed to perform such an analysis can be broken down into four basic parts that consist of cost-minimization analysis (CMA), cost-effectiveness analysis (CEA), cost-benefit analysis (CBA) and cost-utility analysis (CUA). These four categories will contain the major financial analytical techniques employed when evaluating medical treatments and interventions along with other types termed cost-consequence
In order to make ones’ health care coverage more affordable, the nation needs to address the continually increasing medical care costs. Approximately more than one-sixth of the United States economy is devoted to health care spending, such as: soaring prices for medical services, costly prescription drugs, newly advanced medical technology, and even unhealthy lifestyles. Our system is spending approximately $2.7 trillion annually on health care. According to experts, it is estimated that approximately 20%-30% of that spending (approx. $800 billion a year) appears to go towards wasteful, redundant, or even inefficient care.
There is no denying the fact that the cost of health care in the United States has been on a constant rise than the wage of the employees that pay to have access to better healthcare. There is the general fear among these employees that if the rising cost of the health care is not brought under control, there will come a time, and some analyst think, the time is already here, when those employees will not be able to afford health care for themselves and their families. This fear of the unknown is particularly evident among those closer to retirement. Employers of labor have for quite sometimes now, been shifting the burden of the high cost of affordable health care to their employees, and that has significantly reduced employee standard of living the past couple of years. Similarly, rising health care costs could also drive up inflation and make U.S.-made goods and services less competitive in international markets in the long run because increasing health care costs might eventually be reflected in higher product prices.
2. The twin problems of the health care industry as viewed by society are cost and access. First of all, the cost of getting health care is very high and it is getting higher each day. This has been mostly caused by the combination of high cost and an increase in quantity of services provided to the communities. The other problem involves access to health care. American enjoy limited or no access to health care. Many efforts have been done to reform this, but still but still many people are left without access to the care. These two problems are related due to the fact that if the health care industry gets to high off course people no longer will be able to have any access to it. The higher prices are, the lower access people have to it.
Variable costs: “Variable costs are costs that vary with the volume of activity”2 and they are: direct labor, Materials, Material spoilage & direct department expenses.
...h the full expenses included. Challenge overseeing and incorporating over a huge supply change and developing patterns.
Regulation plays a huge role in the healthcare industry. The healthcare industry restrain of health care costs by imposing price controls ignore the long history of failure through that process. Regulated prices prevent markets from efficiently allotting resources, leaning to unescapable deficiencies and failing quality, while boiling improvement and averting care to inequitable black markets. Internationally, tight price controls in Japan manifest many of these failures, while the Netherlands has relished advances in cost and quality by abandoning them for market-based pricing. Government –fixed prices for hospitals in Maryland and under Medicare have worked only to expand costs and the power of providers. Now, with Obamacare increasing the taxpayers’ duty for funding health care, all knowledge proposes that efforts to regulate provider prices will likely prove expensive and counterproductive.
Since more than 40 years, Toyota Company was thinking how to develop the traditional process costing system and the production system. Some of the companies believe that the increasing of the production is a big profit, while Toyota proved the opposite. The more you increase the products out of the need of the market, the more losses you are going to gain. This kin...
Process costing is a way of breaking down cost that goes into each product manufactured. This allows for the correct pricing of the product as well as looking at possible inefficiencies in the production process. The following reasons explain the importance of correctly allocating cost to each product.
Job costing involves usage of situations where every job is done cost differently, consumers specifications play a bigger picture in this case. Direct and indirect costs are encountered. It is believed that job costing has lots of costs accrued from the production to the consumers (REEVE, J. M., WARREN, C. S., & DUCHAC, J. E. 2012). This involves labor, running of machines, and all the individuals who are involved in the production of a product from raw to the final product, indirect costs are applied in this order. Job costing order is best showcased in a manufacturing company, let’s take coca cola company, company specialized in beverages manufacturing and distribution, usually customers have no say in the final products of this company, but as the trends for consumption of a certain flavor, according to their statistics they will conform with the demands. The special requirements, like name branding on the bottles of the beverages, customization of the containers have had a significant impact in the consumption of coca cola products (Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. 2010).
The overall purpose of cost accounting is to advise top administration and the management team on the most suitable and cost effective methods and actions to employ based on cost, capability and efficiencies of a given product or service. It can be defined as the method where all the expenditures used during execution of business activities are gathered, categorized, examined and noted down (Horngren & Srikant, 2000). Once these numbers are gathered and recorded the information is used to determine a selling price and/or to identify possible investment opportunities. Although the principal aim or function of cost accounting is to help the business administration with their decision making and business planning process, the cost accounting data
Therefore, job order costing system is a widely used costing system in manufacturing as well as service operations. Moreover, when companies employ and accept orders or jobs for varying products, the assignment of cost to products becomes a strenuous task. Job order costing systems can be utilized in many aspects and entities in production of product offerings. An example of a situation in which you would use job order cost information is in an industry such as the building construction industry since each building is unique. Job-order costing systems need an average overhead rated based on a common measure of production, which includes labor hours, machine hours, or square footage (Edmonds, Tsay, & Olds, 2011).
Indirect labor costs –wages and salaries of staff not involved in the production process. For example wages of employees in purchasing department or security guards overseeing the production premises. Among indirect labor costs belong also: