Categories for Cost

Feasibility Study Essay

Feasibility Study Essay


The feasibility of the project is analyzed in this phase and business proposal is put forth with a very general plan for the project and some cost estimates. During system analysis the feasibility study of the proposed system is to be carried out. This is to ensure that the proposed system is not a burden to the company. For feasibility analysis, some understanding of the major requirements for the system is essential.

Three key considerations involved in the feasibility analysis are



This study is carried out to check the economic impact that the system will have on the organization.

The amount of fund that the company can pour into the research and development of the system is limited. The expenditures must be justified. Thus the developed system as well within the budget and this was achieved because most of the technologies used are freely available. Only the customized products had to be purchased.


This study is carried out to check the technical feasibility, that is, the technical requirements of the system. Any system developed must not have a high demand on the available technical resources. This will lead to high demands on the available technical resources. This will lead to high demands being placed on the client. The developed system must have a modest requirement, as only minimal or null changes are required for implementing this system.


The aspect of study is to check the level of acceptance of the system by the user. This includes the process of training the user to use the system efficiently. The user must not feel threatened by the system, instead must accept it as a necessity. The level of acceptance by the users solely depends on the methods that are employed to educate the user about the system and to make him familiar with it. His level of confidence must be raised so that he is also able to make some constructive criticism, which is welcomed, as he is the final user of the system.

Project Estimating Techniques Essay

Project Estimating Techniques Essay

One of the most important factors to the success of a project is how well the project is estimated, as well as how overall costs are managed during the execution phase by the project manager. Project costs and estimates are vital to the success of any organization to remain competitive in the market. Cost estimating for organizations rely heavily on resources that can sometimes be difficult to obtain. Forecasting and utilizing historical return costs are just a couple of ways that organizations rely on estimating.

Experienced planners are often a sought trade within the market; this paper will discuss some often used project cost estimating techniques.

Types of Estimating

The first type of estimating is analogous. This type of estimating utilizes estimates from a previous project that is similar, and uses them to build estimates for the new project. While this type of estimating is beneficial to the planning process, caution must be used to ensure that estimates carried over from the previous project are fair and reasonable.

Parametric estimation takes historical data inputs, makes calculated assumptions based on market and statistical data, and then formulates the estimate. This type of estimating is useful as it does use historical data, coupled with statistical data; however, assumptions made by the planner can be skewed and lead to inaccurate estimates in my opinion. The next type of estimating is bottom-up. Bottom-up estimating utilizes information from individual estimates through the Work Break Down structure. This type of estimating is one of the most common types of estimating because it uses estimates from the floor tasks.

These floor tasks are estimated by subject matter experts with years of experience, and can be very beneficial to ensuring that not only the estimate is accurate, but the scope of the task is correct. Another type of estimating is three-point estimating. Three-point estimating takes a look at the best, worst, and most realistic scenario to cost estimating the project. These three options obviously come with a premium on cost, time, or quality. Dependent on what the project objective is will more than likely determine what route to take in this process. From my work experience with project planning, cost estimating can be a very difficult task. Most organizations have a method or process in how to cost estimate. Some utilize checklists, while others may standard operating procedures as part of an organizational policy.

Regardless of what tools are available to a project team during the cost estimating process, knowing the overall goals and objectives of the project are keys to estimating a successful project. The burden of cost estimating is not normally the responsibility of one individual; it often lies within the project team. Multiple estimators from various skills are part of the process, and all types of estimating as discussed earlier are part of the process. Tools that my organization utilizes are bid specification review meetings that go over the material, labor, and rates that apply to the work being conducted during the project. In addition, an independent government estimate (IGE) is utilized to ensure that estimates are filled out thoroughly, and reviewed against the contractor’s estimates upon receipt. There are many other processes that can be used; however, these are the most commonly one’s used within government estimating.


Cost estimating is a very important part of the project planning process as it often dictates the duration of the project, and how much work can be accomplished during the project against the budget given for the project. Estimates of time and cost together allow the manager to develop a time-phased budget, which is imperative for project control (Larson & Gray, 2014, p. 131). While there are many different ways that estimates are created, there is no sure fire way in stating that one is better than the other.

While some may think that historical data is a more accurate way, there is not telling that the estimate and return costs from a previous project were fair and reasonable. If the previous project cost was overestimated, then the current project would continue to be overestimated; therefore not proving to be a cost benefit to the organization. Cost estimating drives the project plan, and organizations need to ensure they utilize all the tools and resources they have available to them to make the project a success.

Larson, E. W., & Gray, C. F. (2014). Project Management: The Managerial Process (6th ed.). McGraw-Hill.

Cost-Benefit and Cost-Effective Evaluation Methods Useful for Evaluating Effective Training Essay

Cost-Benefit and Cost-Effective Evaluation Methods Useful for Evaluating Effective Training Essay

For over a hundred years the concept of both cost-benefit evaluation and cost-effective evaluation methods has been used for numerous fields and industries to see the positive and negative sides of undertaking a project. These methods has been used to analyze public health; transportation; and etc. Each and every company would rather see more of profits than losses. Employers see that their employees and the trainings are investments to their business.

Hence, employers need to have assurances that the trainings that they give out to their employees would be both beneficial to the employers in terms of profit and as well as return of investment (ROI).

In order to gain much profit, the employers need to have their employees be up to par with industry standards with avant-garde skills through effective training. Employers do take note that in order to have highly qualified employees they need to give effective and quality training.

Using the above mentioned evaluation methods would let the employers know: how much it would cost them to train their employees; the duration of the training – would determine the effectiveness and implementation of the skills.

Then again these methodologies are not full-proof as there are numerous factors to be taken note of, to guarantee one hundred percent success rate of these trainings such as: the capabilities of their employees, the willingness of their employees to learn these trainings; and finally applying them during operation.

The use of these evaluation methods can be a rough guide to corporations and institutions, to name a few, to see the quality and assess projected costs of trainings and steps to be taken. With such projections yielded by these methods one may be on track with their project management and asset management.

Management Information System Essay

Management Information System Essay

Organizations and Information Systems * Information technology and organizations influence one another * Complex relationship influenced by organization’s structure, business processes, politics, culture, environment, and management decisions The Two-Way Relationship between Organizations and Information Technology This complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment. What is an organization? * Technical definition: * Stable, formal social structure that takes resources from environment and processes to produce outputs.

* A formal legal entity with internal rules and procedures, as well as a social structure * Behavioral definition: * A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution The Technical Microeconomic Definition of the Organization

In the microeconomic definition of organizations, capital and labor (the primary production factors provided by the environment) are transformed by the firm through the production process into products and services (outputs to the environment).

The products and services are consumed by the environment, which supplies additional capital and labor as inputs in the feedback loop. Figure 3-2 The Behavioral View of Organizations The behavioral view of organizations emphasizes group relationships, values, and structures.

Figure 3-3 * Features of organizations * All modern organizations share some characteristics, such as: * Use of hierarchical structure * Accountability, authority in system of impartial decision-making * Adherence to principle of efficiency * Other features include: Routines and business processes and organizational politics, culture, environments and structures * Routines and business processes * Routines (standard operating procedures) Precise rules, procedures, and practices developed to cope with virtually all expected situations * Business processes: Collections of routines * Business firm: Collection of business processes Routines, Business Processes, and Firms All organizations are composed of individual routines and behaviors, a collection of which make up a business process. A collection of business processes make up the business firm. New information system applications require that individual routines and business processes change to achieve high levels of organizational performance.

Figure 3-4 * Organizational politics * Divergent viewpoints lead to political struggle, competition, and conflict * Political resistance greatly hampers organizational change * Organizational culture: * Encompasses set of assumptions that define goal and product * What products the organization should produce * How and where it should be produced * For whom the products should be produced * May be powerful unifying force as well as restraint on change * Organizational environments: Organizations and environments have a reciprocal relationship * Organizations are open to, and dependent on, the social and physical environment * Organizations can influence their environments * Environments generally change faster than organizations * Information systems can be instrument of environmental scanning, act as a lens Environments and Organizations Have a Reciprocal Relationship Environments shape what organizations can do, but organizations can influence their environments and decide to change environments altogether.

Information technology plays a critical role in helping organizations perceive environmental change and in helping organizations act on their environment. Figure 3-5 * Organizational structure * Five basic kinds of structure * Entrepreneurial: Small start-up business * Machine bureaucracy: Midsize manufacturing firm * Divisional zed bureaucracy: Fortune 500 firms * Professional bureaucracy: Law firms, school systems, hospitals * Adhocracy: Consulting firms * Other Organizational Features * Goals * Constituencies * Leadership styles * Tasks Surrounding environments How Information Systems Impact Organizations and Business Firms * Economic impacts * IT changes relative costs of capital and the costs of information * Information systems technology is a factor of production, like capital and labor * IT affects the cost and quality of information and changes economics of information * Information technology helps firms contract in size because it can reduce transaction costs (the cost of participating in markets). Outsourcing expands * Transaction cost theory Firms seek to economize on cost of participating in market (transaction costs) * IT lowers market transaction costs for firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees The Transaction Cost Theory of the Impact of Information Technology on the Organization Firms traditionally grew in size to reduce transaction costs. IT potentially reduces the costs for a given size, shifting the transaction cost curve inward, opening up the possibility of revenue growth without increasing size, or even revenue growth accompanied by shrinking size.

Figure 3-6 * Agency theory: * Firm is nexus of contracts among self-interested parties requiring supervision * Firms experience agency costs (the cost of managing and supervising) which rise as firm grows * IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employees The Agency Cost Theory of the Impact of Information Technology on the Organization As firms grow in size and complexity, traditionally they experience rising agency costs.

IT shifts the agency cost curve down and to the right, enabling firms to increase size while lowering agency costs. Figure 3-7 * Organizational and behavioral impacts * IT flattens organizations * Decision-making pushed to lower levels * Fewer managers needed (IT enables faster decision-making and increases span of control) * Postindustrial organizations * Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positions Flattening Organizations

Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower-level employees more decision-making authority. Figure 3-8 * Organizational resistance to change * Information systems become bound up in organizational politics because they influence access to a key resource — information * Information systems potentially change an organization’s structure, culture, politics, and work * Most common reason for failure of large projects is due to organizational & political resistance to change

Organizational Resistance and the Mutually Adjusting Relationship between Technology and the Organization Implementing information systems has consequences for task arrangements, structures, and people. According to this model, to implement change, all four components must be changed simultaneously. Figure 3-9 * The Internet and organizations * The Internet increases the accessibility, storage, and distribution of information and knowledge for organizations * The Internet can greatly lower transaction and agency costs * E. g.

Domestic Adoptions Costs are Entirely to Expensive Essay

Domestic Adoptions Costs are Entirely to Expensive Essay

The costs of domestic adoption are entirely to expensive. Every year in the U. S. alone there are over a hundred thousand children waiting and available for adoption; but because of the high cost, they may never be adopted. In most cases domestic adoption is way too expensive, ranging from $2,500 up to $40,000 depending on the child and his individual circumstances (“Costs of Adopting,” par. 2). The longer a child has to wait to be adopted, they are more likely to develop psychological problems due to trauma cause by their own birth family, multiple moves while in foster care and all types of abuse.

There are so many great families and couples out there longing to adopt a child who cannot afford the price tag that is put on children that are placed for adoption. I believe the cost of domestic adoptions should be minimized to make it affordable for all families and couples, to ensure that every child gets the chance to have a family of his own and a healthy childhood instead of waiting in foster care or orphanages too long.

Adopting a healthy infant in the U. S.

typically costs $5,000 to $25,000 and can go up from there depending on the circumstances of the infant and birth mother or birth parents (“The Changing.. ,” par. 1). Still this is a hefty price to pay and if the infant is not adopted it may end up in the foster care system for years. In 1998 only 36,000 children from foster care were adopted, which was an increase of 5,000 since 1997, when only 31,000 were adopted. These numbers of adoption may seem high, but at least 100,000 of the children available for adoption were not adopted, leaving them without a family.

The average age of the children adopted was 7 years (“Adoption Fact Sheet”), but still why should any child have to wait this long? In 2005 the number of children available for adoption, waiting in public foster care totaled 115,407 (“Children in Public…”). There are so many children now who are waiting to be adopted. Here in the U. S. 20% of the 650,000 children in an out of home placement are available for adoption. Many of these children have special needs, which could possibly lower their adoption cost (“What You Should…,” par. 3).

While waiting for a family and home to call their own these children usually experience some kind of trauma caused by their birth family or moving from home to home while in foster care simply because something just didn’t work out right. In this process some of the children may have been physically , emotionally or sexually abused (What You Should…,” par. 4). All of these situations can cause harm to the child and permanently scar him for emotionally. Most of these children cannot form any secure attachments because of the trauma they have experienced.

The attachment process is very important and has a lifelong impact on all children. Therefore it is so important for all children to be in a good healthy environment where they will be able to develop healthy and secure attachments. I believe this is why it is so important for a child to be adopted quickly and not have to wait for years where so much important and precious time is lost. There are so many couples and families who want to adopt but adoption is not within their reach because of the high costs. If the costs were lowered many more children would be adopted into great homes.

You do not need to be loaded with money to be a great parent and to provide a loving and nourishing home for a child to grow up in. There are some ways to help couples and families pay for adoption such as employer benefits, tax credits, or adoptions loans and grants; but the problems with these options is that not all couples or families meet the qualifications to receive any help (“Adoption Cost). With loans you must meet specific qualifications and then pay back money loaned. When it comes to grants there is also a list of qualifications that weed out a lot of prospective parents.

As for the employer benefits, only a third of U. S. employers offer this (“The Changing…,” par. 4). The federal government offers tax credits only to families who privately adopt infants, but does not offer the same support to families who adopt children in foster care (Wright, par. 3). Money drives almost everything in adoption. A fact which causes the line between baby selling and adoption services to become blurred is that many attorney’s fees are very high and unreasonable (Wright, par. 11). There are many reasons one may say that adoption costs of up to $40,000 is reasonable.

Usually the agency a prospective parent must go through to adopt, has typical adoption services they provide: including professional services for both the adoptive and birth parents, birth parent expenses, new born care and services, legal and investigative expenses, salaries and employee benefits and general insurance (“Why Does Adoption…,”). These costly services do add up; but I do believe a few things should be done differently that would lower the costs of these services. If the birth mother does not have insurance, she can be on Medicaid to cover prenatal and postnatal healthcare.

We pay in taxes to cover such things every day. I also believe that if the adoptive parent has a contract to adopt a child, then that child should be placed on the adoptive parent’s insurance for his medical needs. Doing these things could cut down on the costs greatly. Plus if more children could be adopted from foster care sooner, that alone would save the government a lot of money that is paid to keep the children up. I do not understand how anyone can put such a price on a child’s life and well being.

What is more important, the child having a great fulfilling life or sitting in an orphanage or foster home for years and possibly experiencing some awful things, because people who would love to have them and take care of them cannot afford to adopt them? It all seems to me like the whole adoption process is nothing but selling babies and children. Why should you have to pay so much for a child when you are making a commitment to provide and care for and cherish them for the rest of your life? You will be responsible for all their need in the following years and that should be quite enough payment to put forth.

You must have a home study completed before you can begin the adoption process. This ensures that you are able to provide a good sufficient home for a child; so why not lower the costs of adoption? It’s not like unfit couples or families would be able to adopt just because they may be able to afford it. I don’t see how any child deserves to be without the love of a family. You should not have to be rich to be able to afford adoption costs, a families status should have nothing to do with wither they can give a child a loving, nourishing and stable home.

I truly believe if adoption costs were lowered more children would have loving homes and couples who cannot have a child of their own or those who have a child or children already would be able to complete their lives by adopting. This would benefit everyone involved: every child without a family, every hopeful future parent and family who yearns for another child to make their lives complete.

Works Cited

“Adoption Cost”. A Child to Love. 3 Sept. 2009. http://www. achildtolove. com/cost/. “Adoption Fact Sheet”. Child Welfare League of America. March 1999.

< http://www. cwla. org/p rintable/printpage. asp>. “Children in Public Foster Care Waiting to be Adopted: FY 1999 thru FY 2005”. Administration for Children and Families. 1Sept. 2009. <http://wwwacf. hhs. gov/programs/cb/stats_ research/afcars/waiting2005. htm>. “Costs of Adopting”. Child Welfare Information Gateway. 2004. 25 Aug. 2009. <http://www. ch iLdwelfare. gov/pubs/s_cost/index. cfm>. “The Changing Face of Adoption”. Parents. com. September 2001. 30 Aug. 2009. <http://www. parents. com/parents/story. jhtml? storyid=templatedata/parents/story/data3225…..

>. “What You Should Know Before You Adopt A Child”. Institute for Attachment and Child Development. 4 April 1997. 28 Aug. 2009. <http://www. inststuteforattachment. org/arti Cles/article43. htm>. “Why Does Adoption Cost So Much? ”. American Adoptions. 29 Aug. 2009. <http://american adoPtions. com/adopt/article_view/article_id/3179? PHPSESSID=235…>. Wright, Graham. “Money, Power and Accountability: The “Business” Of Adoption”. The Evan B. Donaldson Adoption Institution. November 1999. 27 Aug. 2009. <http://adoption Institute. org/procd/confessions/transtest13. html>.

Dogfight over Europe: Ryanair Essay

Dogfight over Europe: Ryanair Essay

A. What is Ryanair’s strategy and why has it been successful so far? In 1911, Ryanair faced cash flow problem, and was going to be bankrupted. However, it found the way to overcome this crisis by transform themselves from ordinary high-price airlines into the lowest price airline in the EU. They focused on 5 things to rebirth their company.

1. Focused on cut down the costs: Ryanair aggressively cut most of its costs in many ways. Found the routes and airports that charged low landing fees, and low turnaround costs Chose routes to Secondary airports, low airport fee

Eliminated all in-flight amenities
Used metal stairs instead of “air bridge”
Paid lower commissions to travel agents
Saved cost in its internal operations
Implemented economies of scale by using one model aircraft and treating all customers equally

2. Focused on operating efficiency: Ryanair carefully allocate all of its resources and assets to get the highest performance outcome. Optimized airplanes usages by relocating the planes used in loss-making routes to gain-making routes.

Attempted to increased aircraft turnaround rate in many ways Operated only one type of aircraft

Provided the newsletter to employees, which contained its and its competitors’ movements

3. Focused on customer satisfactions: Ryanair sustained customer care. Even though they are mostly middle-to-low classes who expected less services due to the lowest airfares, they would receive more than their expectation. There were 160 full-time reservation agents at its call enter at Dublin answered calls Maintained its record for on-time flight due to good-performed aircraft turnaround Received airfares in other currency

Had fewer restrictions to change the tickets
4. Focused on ancillary income: Ryanair gained extra revenue from other sales and services. In-flight sales: beverages, snacks, and traditional items
Advertised spaces renting
Other referred fees

5. Focused on its employees: Ryanair never forgot to sustain and motivate employees. Imprinted its values to employees. “the firms as brutally cost conscious” Gave its stock options to employees
Rewards system varied with performance, commission, and corporate profits Had lots of job opportunities, e.g. promotion or rotation
Had no bureaucracy and hierarchy

Compared to its competitors, Ryanair became succeed because it was the first low-cost airlines which provided low airfares that generate increased volume of customers. At the same time, it had maintained a continuous focus on customer satisfactions, cost management and operating efficiencies, leading to the great reputation that transfer “from mouth to mouth” by its loyalty customers. That created more customer and more income, being its sources of fund for reinvest. Also, the extra revenue from sales, advertised spaces renting, and referral fees could support its financial health and accommodate it to sell the ticket more lower price. Moreover, started with people, Ryanair’s employees shared the same values and goals with their company, “cost-conscious” with “good-services”.

Sharing the company’s benefit with them also motivated them to work better and better. This was the other important foundation for its success. That’s why, Ryanair was success and became very high competitiveness in this market. B. Looking to the future, what should be the strategic concerns of Ryanair? What recommendations would you make to the top management? In my opinions, the most strategic concerns of Ryanair is its competitors. Assuming we were in 1999, at that time, no carrier that were Ryanair’s primary competitor. However, in this year, no-frills carriers accounted for 3% of the European air travel market. This implied that the competition would be more intense. I would like to go through each competitors one-by-one.

Virgin Express: It was most harmful competitor. It had many features as same as Ryanair, and some of them were better than Ryanair’s, e.g. nine languages services in ticket reservations, no physical tickets (lower its costs), etc. Virgin Express’s financial lost in 1998 might be resulted from only a shortage of pilots. If Virgin Express could fix that problems, continuously improve its features, and fully implement cost control, it would become very competitiveness to the market. Suggestion for Ryanair: Sustain doing the ways Ryanair was, improve quality of service, innovate the ways to reduce costs, and focus more in marketing and creating brand awareness easyJet: It was also harmful competitor. It had the same business model concerned about cost control, it gradually grew and was going to change from subcontracting to their own operation by reinvesting.

However, its philosophy was “won’t complete with other low-fare guys”. Suggestion for Ryanair: Quickly expand the flying routes and grasp that benefits before easyJet does. British Airway’s Go: British Airway’s Go had powerful backups and great brand values. It provided better service in-flight but also sold ticket at the cheap price. Leading to the price competition in the future. Suggestion for Ryanair: The company have to innovate its new unique point to eliminate the problem that it would have faced the loss of its customers to the competitors. It also need to in-depth its group of customers to find the ways out. Also, Ryanair have to be alert all the time. As the market become more intense, only dynamic organization can survive.

Cost of delivery Essay

Cost of delivery Essay

1. The chain stores’ request to reduce cycle time by shipping directly to the stores would seriously affect the service model and delivery costs for BKI. Because, the proposed model would mean that BKI would have to process more number of deliveries in smaller quantities and transport them separately to each store. Cost of delivery will increase due to smaller quantities to be delivered directly to stores resulting in more trips, farther distances and lower economies of scale.

This is in complete contrast to the more structured and systematic current model of weekly deliveries of standard quantities to the stores’ warehouses.

2. In my opinion, Joe Rutner’s proposal of establishing a set of six company-owned facilities to act as regional DCs seems to be a step in the right direction for taking on the supply chain requirements of BKI’s customers in the future. Rather than dismissing this store’s request as a one-off case and handling it on a temporary basis, Rutner has proposed a solution that is likely to take the company forward into the future.

He understands that the retail stores are themselves are looking to cut costs by improving their inventory and supply chain management and such requests would become common from most if not all of the existing customers. Moreover the new retail stores mushrooming in the market are likely to have less regional facilities and would need the proposed arrangement from BKI. 3. The matter of ownership of these facilities is very important for the success of this proposed supply chain arrangement as the management of BKI needs to study the long term impact of the costs involved.

In the long term it would be better if BKI goes for direct ownership of the facilities as it would benefit the profitability of the operations by keeping the costs of maintenance lower than those involved in the alternatives such as co-owned or franchisee structure. However, the management will have to consider the availability of capital resources if it opts for direct ownership. The capital required for the facilities could be lowered to an extent by going for rented building rather than constructing new premises. This would decrease the time required to implement the new proposal also.

Harper: Cost and Attractive Markets Essay

Harper: Cost and Attractive Markets Essay

How good is the product? The product in theory has great potential able to save costs in two major industries, ceramics in paints. Looking at both individually: 1) Paints: Potentially 12 – 18 cents of savings to original estimations, however research with client has shown great difficulty. Was not working well due to suspension problems, was unable to have the right shine for use in white paints. Furthermore, once quality of end product was acceptable, savings was found to be 3cents per a gallon, which was deemed not worthwhile.

However more wear on tear on machinery due to abrasive properties of domimite. 2) Ceramics: Huge initial investment to switch over the dies but estimated to be a large number of advantages: a. Strength of tile improves b. Minimal moisture expansion c. If used more than 20% thermal expansion goes down reducing tile mfg time. d. Low temperature in kiln e. Reduces Variable cost of tile by 17% through the above mechanisms. Tile industry Fixed cost is huge due to machinery, labor etc.

However actual tests have not been so conclusive. While advantages of them are seen, there have been issues with warping and with cracks. Penetration with smaller suppliers but failed to interest medium and large manufacturers.

What obstacles has Harper encountered in developing the market for Dominite? Single source player, very unattractive to large customers Testing has been inconclusive Failed to find right mixture Failed to sale the higher grade material Penetrated the wrong market segment

Should Harper try to sell the Dominite operation? It Depends  How much for? For the right price, certainly. It comes down to how realistic are the new projections that came out in 1985. Can we really meet those targets? I doubt it. How much do we need to sell to break even? Assuming we use 1985 costs for 1986 we would need to sell? Doing the math I assumed everything was a fixed cost except for the 35% of the plant cost(if I took anything else as a variable cost it would go more than the price)giving us a VC of 48. There fore we would have needed to sell 54 thousand units which is way way way more. I do feel that selling costs and admin costs should be part of variable costs, but when I calculate it that way our VC is more than our price which is fucked up.

Basically we really need to sell more or sell the entire division. If the decision is not to sell the Dominite operation, what changes should be made in the current sales program? What are the most attractive markets? What offer should be presented in terms of value proposition and price? Basically our sales are not doing too well. Take one look at the original projections and our current sales data. Stuff of nightmares. The question is how can we improve it? We have been using trade shows, industry magazines and cold calls. They have gone as far as to leverage their contacts within the pain industry but it is still not clicking. I think we need to spend some serious R&D time. Our sales pitch so far has been hey, use some dolomite and shit will get better. My recommendation would to actually figure out what formula works for which application and actually sound like we know what we are talking about when we go to the customer.

The most attractive markets are obviously paint and ceramic given our product. Let us look at each one of those individually: 1) Ceramic: 33% of market is 4 big guys, this is key. Any one of them will buy 40 – 60 thousand tons a year and we will be able to break in. At all costs we must try and get to one of these customers. 33% is medium players amounting to 12 companies. The customer trying to buy us out is in this category. No data on how much they buy but I find it to be a lot less than what we need to even break even 33% left are all small which we have been hitting. 2) Paint: 25% of the market is with big guys and 75% with the small guys. Again we have to target the big players.

The small guy stratergy is not cutting it. Though given the technical difficulties with paint and the minor margins we make, I am wondering if we should save on those sales resources and move them to ceramics. Our valuation offer is basically price saving and reduced time for manufacturing. Our price is competitive with talc which is the product we directly compete with, however we are barely making it. It’s a hard call and I want to discuss with you guys in the meeting tomorrow. Are any changes needed in the Dominite sales organization? First of all we are cannibalizing our own sales resources with the introduction of superfine. I think we need to dedicate resources solely to dominite to make an impact. Second of all all the above points I made about hitting the right market segments.

Cost of Goods Checkpoint Essay

Cost of Goods Checkpoint Essay

A multi-step income statement for a trading business highlights the fact that between 40% and 60% of revenue from sales is accounted for as the cost of goods sold. The cost of goods attributed to a company’s products is expensed as the company sells these goods. There are several ways to calculate COGS but one of the more basic ways is to start with the beginning inventory for the period and add the total amount of purchases made during the period then deducting the ending inventory.

(According to Kimmel, Weygandt, and Kieso), cost of goods sold is found by taking the cost of goods available for sale (beginning merchandise inventory + net purchase), less the ending merchandise inventory (p. 244). In a wholesale or retail trading business, merchandise held for resale in the normal course of business is the largest asset owned by the organization. For this reason it is vital that accurate up-to-date records be maintained when goods are acquired and inventories taken.

Finished goods and or merchandise makes up cost of goods sold.

There are two classifications of inventory: merchandiser or manufacturer. In a merchandiser company inventory consists of many items all different. Whereas, a manufacturer, some inventory may not be ready (Kimmel, Weygandt, & Kieso, p. 282). Examples of items that make up cost of goods include; produce, clothing, electronics, items that can be resold from manufacture to a company to the customer. This means when the business acquires a finished product, the cost of the product goes into an inventory asset account.

The customer will then purchase the product, finished good, the business transfers the cost of the product from the inventory asset account to the cost of goods sold expense account because the product is no longer in the business’s inventory (Kimmel, Weygandt, & Kieso, p. 282). References Kimmel, P. D. , Weygandt, J. J. , & Kieso, D. E. (2011). Financial accounting: Tools for business decision making (6th ed. ). Retrieved from The University of Phoenix eBook Collection database

The balance between cost and quality Essay

The balance between cost and quality Essay

Before we look closer into the subject, first we must look at exactly what is meant by quality and cost.

Quality is the totality of the attributes of a good or service that meet the requirements of the buyer or customers. The materials which make up the product, the design and the engineering of the product, product performance, reliability and durability are all important characteristics of the “quality package”, which ultimately influence customers to buy a product and repeat-purchase It. (Pass 1995)

Cost is the expenditure upon resources incurred by a firm in producing and selling its output, Each cost is a charge against revenues and profits for the use or consumption of resources during a trading period.

Cost can be classified along the functional lines, distinguishing between production, selling, distribution, administration and finance costs. (Pass 1995)

Quality is a term we use to signify excellence of a product or service. We think of a quality product, for example a B.M.W. motorcar. We know its well designed, well built and will therefore last a long time. If we think of car of being low quality, we think of something like a basic model type of Citroen or Fiat, with its flimsy panels, cheap components and low specifications.

The quality hotel is denoted by the internationally recognised star rating system, i.e. a 1 star hotel will provide the most basic of comforts and low on hygiene, and a 5 star hotel will provide the most comforts and services. We can immediately recognise then, by simply looking at a hotel’s star rating how good it will be and how good of a time we will have if we stay at the hotel.

Total Quality Management (TQM) is an organisational process that actively involves every function and every employee in satisfying customer’s needs, both internal and external. TQM works by continuously improving all aspect of work through structured control, improvement and planning activities that are carried out in concern with guiding principles that focuses on Quality and Customer Satisfaction as the top priorities.

TQM recognises that the Customer is at the centre of every activity. The customer may be external or internal. The key is to determine the gap between what the customer needs and what the system delivers. Once the gap is recognised, it would be systematically reduced and results in never-ending improvement in customer satisfaction at every level.

The balance between cost and quality in purchasing is questioned when an organisation is looking to purchase the best for what they can get for their money. However, this is not always the case. One of the main considerations in the purchasing functions is that the quality in question is fit for purpose. Sometimes the overriding factor on the decision to purchase is that products are of the highest quality. E.g. luxury car manufacture Roll Royce will pride themselves on using the finest materials when manufacturing their cars. When at the ordering stage the emphasis will be on high quality rather then cost. Keeping cost to a minimum is an important factor for any business including companies like Roll Royce (to a certain degree). However, Roll Royce will not compromise their image of quality for the sake of cost.

Often, a company has no choice but to use the most expensive materials or highest quality that money can buy. Sometimes safety is the overriding factor. If Rolls Royce is building an engine that is going to be mounted onto an aircraft, then titanium will be the preferred choice of material. Titanium is extremely expensive but will guarantee the utmost reliability in this situation.

As mentioned above, purchasers have to take into consideration whether or not the quality is fit for purpose and what the product is going to be used for. The decisions that are made can be made personally for individual use or at corporate level. E.g. if a purchasing manager for a car manufacturer has to make a decision on the type radio to buy, then there is a combination of factors that will need to be considered. The price will have to suit his budget. The quality would have to be of a standard that one would expect from a car of that type from the company.

The buyers final decision may well
be to buy a radio system that he or she would never consider putting in their own car. But yet the decision made will mean that the system chosen will go into thousands of newly built cars. This is because the decision made was not personal; it was made of behalf of a company so it had to suit their needs.

Many purchasing managers are under constant pressure to drive cost down. Even professionals have problems finding the balance between cost and quality when their budget is very low. If costs are too low then it seems inevitable that the quality will suffer. The Ford motor company has suffered the consequences of cutting costs too low. After rave reviews following introduction of the new Ford Focus into the US market, Ford decided to build the car using cheaper components in a bid to save money. The cheaper components included rear wheel bearings that would prematurely wear, causing noise and wheel instability.

Not only does Ford now has to recall thousands of Ford Focuses, but it also has to deal with the fact the this decision has damaged their reputation even further.

As people we are constantly trying to find the balance between costs and are own perception of quality on a daily basis. According to Juran, quality is: “fitness for intended use.” This definition basically says that quality is “meeting or exceeding customer expectations.” So according to this theory, we achieve quality when we buy a product that does what its supposed to do. If a purchasing manager is buying radios that he or she wouldn’t use personally, this still ties in with Juran’s definition of quality because the radios will meet the customers expectations, although is will not meet the buyers.

When we shop we have to ask ourselves if the use of the product will justify the cost. E.g. when studying late at night, the natural choice of beverage for some students would be something like the caffeine boosting energy drink Red Bull at the cost of ?25. ?25 is far too much to pay (double) for a can of fizz pop. On this particular occasion, the beverage will not be used as a thirst quencher or as a vodka mix, but used as an aid to keep the student awake through the studying session. The cost (?25) of the product is justified due to the products fitness for intended use.

Deming states that the customer’s definition of quality is the only one that matters. This is true but I feel that the customer does not always get quality from what they perceive as quality. This is partly to do with the fact that some companies are very good at doing some things, but is not so good at others. Designer label brand Gucci is a prime example of this. If somebody buys a Gucci designer watch for the cost of ?0, there are a host of other things that the buyer will achieve like admiration, prestige and self-esteem. Gucci is not a watchmaker and does not have the same level of expertise of watch making as Rolex or Cartier. Although somebody who does not have knowledge of watches may perceive this watch as quality.

Those with know-how or those in the industry would regard this watch as crap. Watches of this nature are purely soled through success of the brand. The watches are simply a spin-off from their designer clothesline and are made with very low quality and cheap components. According to Which magazine, the life expectancy for a Gucci watch is two – three years. This is very low compared to Rolex’s lifetime life expectancy.

looking at Pass’s definition of quality, a Gucci watch does not carry vital characteristics such as, reliability and durability, which are key to the “quality package”. This brings us to Deming’s theory that the customer’s definition of quality is the only one that matters. I appreciate that the customers opinion is all that matters them, but whether or not the customer is actually receiving quality is another matter. If a product were purchased on the basis of the customer being happy with the product initially, then it would be very difficult to apply Deming’s theory of quality if the product has hidden defects. Similar to the phrase, “things aren’t always what they seem”.

To achieve high quality, a company does not have to always have to pay the high costs. For example the cars produced by the Japanese used to be of low quality and unreliability was common. Things have changed now. Japanese’s cars are now built to an excellent standard and reliability is second to none. Not only are the Japanese building excellent cars, they are building them at a great speed. This is partly due to lean supply techniques that the Japanese have mastered. The whole area of purchasing and suppliers is streamlined to achieve minimum waste. Adopting these techniques cannot be done over night, but lean supply is an excellent step in the right direction in achieving a good balance between cost and quality long-term.

Philip B. Crosby (1979) believed in the “zero-defects” program adopted by the US federal government defining quality as “conformance to requirements”. He emphasized prevention rather than inspection (audits) and promoted a definition of quality as “meeting the customers requirements the first time and every time”. His work is part of TQM.

Crosby’s (1979) philosophy on quality is driven solely by prevention of defects. It is expressed in a phrase he uses: Do it right the first time and every time. Crosby emphasizes zero defects, given that he believes there is only one level of quality. In other words, the presence of any flaw in the product deprives it of quality. He believes management’s perception and attitude towards quality needs to be transformed if the organisation is going to succeed at delivering quality consistently. For example, Deming and many managers believe that error is inevitable and one only has to deal with it. Crosby believes it is self-defeating to plan and invest in strategies that deal with errors instead of investing in strategies and processes that prevent errors from occurring in the first place (Garvin and March, 1986).

The Lean thinking method allows Japanese car manufactures have strong relationships with their suppliers and offer incentives for better quality. E.g. The supplier will carry out rigorous tests on their products before the buyer receives it to ensure reliability.

Purchasing can improve quality by contributing to the competitive advantage of the undertaking by participating in the procurement of bought – out items at the economical cost.

It is important to ensure that quality is not confused with price and grade.

Managers should be using their extensive knowledge and expertise to provide high quality to both internal and external customers of the purchasing function.

To maximise quality, the purchasing departments responsibilities should meet with the requirements of BS/ EN and BS 7750

Keeping the balance between cost and quality in an important factor for any business. As mentioned above, it depends on what the buyer is trying to achieve overall. If high quality is the overriding factor for a company, then this will tie in with the companies’ high quality image. Whether it is no frills or impeccable quality, managers will try to find a reasonable balance where appropriate.


Lysons, K (2000) Purchasing and supply chain management. 5th edition. Prentice Hall

Crosby, P. (1984) Quality without tears. 1st edition. Mc Graw – Hall companies

Crosby, P. (1995) Quality is still free. Mc Graw – Hall companies

Crosby, P. (1979) Quality is free. . – Dutton signet

Garvin, D.A. and A. March. (1984) A Note on Quality: The Views of Deming, Juran and Crosby. Boston, MA: Harvard Business School Press.

Juran, J.M. (1988) Juran on Planning for Quality, New York: Free Press,.

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