How is the tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to?

Budgeting with Prepaid Cell Phone Service?

Those who find their cell phone service bills are high due to their tendency to go over their limit on plan minutes or text messages could benefit from switching over to prepaid cell phone service. Prepaid cell phone service allows users to budget their cell phone expenses and pay for them in advance. With prepaid cell phone services, users can hold themselves to the limits they set with their prepaid amount and not suffer from unexpected overage expenses at the end of payment periods. Because their payments are made in advance, prepaid cell phone service users also avoid earning additional fees for late payments.

Advantages and disadvantages of standard costing?

Advantages / Benefits of Standard Costing System:Standard costing System has the following main advantages or benefits:The use of standard costs is a key element in a management by exception approach. If costs remain within the standards, Managers can focus on other issues. When costs fall significantly outside the standards, managers are alerted that there may be problems requiring attention. This approach helps managers focus on important issues.Standards that are viewed as reasonable by employees can promote economy and efficiency. They provide benchmarks that individuals can use to judge their own performance.Standard costs can greatly simplify bookkeeping. Instead of recording actual co0sts for each job, the standard costs for materials, labor, and overhead can be charged to jobs.Standard costs fit naturally in an integrated system of responsibility accounting. The standards establish what costs should be, who should be responsible for them, and what actual costs are under control.Disadvantages / Problems / Limitations of Standard Costing System:The use of standard costs can present a number of potential problems or disadvantages. Most of these problems result from improper use of standard costs and the management by exception principle or from using standard costs in situations in which they are not appropriate.Standard cost variance reports are usually prepared on a monthly basis and often are released days or even weeks after the end of the month. As a consequence, the information in the reports may be so stale that it is almost useless. Timely, frequent reports that are approximately correct are better than infrequent reports that are very precise but out of date by the time they are released. Some companies are now reporting variances and other key operating data daily or even more frequently.If managers are insensitive and use variance reports as a club, morale may suffer. Employees should receive positive reinforcement for work well done. Management by exception, by its nature, tends to focus on the negative. If variances are used as a club, subordinates may be tempted to cover up unfavorable variances or take actions that are not in the best interest of the company to make sure the variances are favorable. For example, workers may put on a crash effort to increase output at the end of the month to avoid an unfavorable labor efficiency variance. In the rush to produce output quality may suffer.Labor quantity standards and efficiency variances make two important assumptions. First, they assume that the production process is labor-paced; if labor works faster, output will go up. However, output in many companies is no longer determined by hw fast labor works; rather, it is determined by the processing speed of machines. Second, the computations assume that labor is a variable cost. However, direct labor may be essentially fixed, then an undue emphasis on labor efficiency variances creates pressure to build excess work in process and finished goods inventories.In some cases, a "favorable" variance can be as bad or worse than an "unfavorable" variance. For example, McDonald's has a standard for the amount of hamburger meat that should be in a Big Mac. A "favorable" variance would mean that less meat was used than standard specifies. The result is a substandard Big Mac and possibly a dissatisfied customer.There may be a tendency with standard cost reporting systems to emphasize meeting the standards to the exclusion of other important objectives such as maintaining and improving quality, on-time delivery, and customer satisfaction. This tendency can be reduced by using supplemental performance measures that focus on these other objectives.Just meeting standards may not be sufficient; continual improvement may be necessary to survive in the current competitive environment. For this reason, some companies focus on the trends in the standard cost variances - aiming for continual improvement rather than just meeting the standards. In other companies, engineered standards are being replaced either by a rolling average of actual costs, which is expected to decline, or by very challenging target costs.

What are the limitations of management accounting information?

The Mgt Accounting suffers from certain limitations as follow:Based on Accounting Information: Mgt Acccounting is based on data of Financial and Cost Accounting. Historical data is used to make future decisions. The correctness and effectiveness of managerial decisions will depend upon the quality of data on which these decisions are based. If financial data is not reliable then Mgt Accounting will not provide correct analysis.Lack of Knowledge: the application of Mgt Accounting will be useful to person connected with Decision making process as they have proper understanding of Mgt Accounting and related subjects such as Statistics, Economics, Prinples of Mgt, Engineering etc.,Intuitive decision: In Mgt Accouting decision making based on facts and figures, there is a tendency to make decisions intuitively. Mgt may avoid lengthy courses of deciding things and may take an easy course of arriving at decision, using intuitive. Interitive decisions limits the usefulness of Mgt Accounting.Not an alternative to Administration: The tools and techniques of Mgt Accounting provide only information and not decision. Decisions and their implementations are done, by Mgt. So it has supplementary service function and has no final say in taking decisions and their implementations.Top heavy structure: Introduction of this system is costly affair and can be used by big concerns only. Smaller concerns cant afford to use this system because of heavy cost.Evolutionary state: Mgt Accounting is only in a developmental stage. The technique and tools used by this system give differing results. The conclusions taken from analysis and interpretation are not the same. It will take some time to take a final shape.Personal Bias: The interpretation of financial information depends upon the personal judgment of the interpreter. Personal prejudices and bias affect the objectively of decisions.Psychological Resistance: The Installation of Mgt Accounting involves basic changeless in organizational setup. New rule and regulations are to be framed which affect a number of personnel and hence there is a possibility of resistance from some or other.

Explain the concept of responsibility accounting?

Collection, summarization, and reporting of financial information about various decision centers (responsibility centers) throughout an organization; also called activity accounting or profitability accounting. It traces costs, revenues, or profits to the individual managers who are primarily responsible for making decisions about the costs, revenues, or profits in question and taking action about them. Responsibility accounting is appropriate where top management has delegated authority to make decisions. The idea behind responsibility accounting is that each manager's performance should be judged by how well he or she manages those items under his or her control.Responsibility and Cost CentersThe concept of responsibility accounting has emerged to accommodate the need for management information at a more specific level of detail than can be provided by financial accounting procedures. Responsibility accounting attempts to report results (actual performance) in such a way that: (1) significant variances from planned performance can be identified, (2) reasons for variances can be determined, (3) responsibility can be fixed, and (4) timely action can be taken to correct problems.Under this approach, pertinent costs and revenues are assigned to various organizational units--departments, bureaus, and programs--designated as responsibility centers. In the private sector, responsibility centers may take several forms:(1) A cost center is the smallest segment of activity or area of responsibility for which costs are accumulated.(2) A profit center is a segment of a business, often called a division, that is responsible for both revenue and expenses.(3) An investment center, like a profit center, is responsible for both revenue and expenses, but also for related investments of capital.Outside of relatively large corporations, the cost center is the most common building block for responsibility accounting. In fact, the terms cost center and responsibility center are often used interchangeably. Responsibility accounting placing emphasis on specific costs in relation to well-defined areas of responsibility. Managers often inherit the effects of their predecessors' decisions. Long-term effects of such costs as depreciation, long-term lease arrangements, and the like, seldom qualify as controllable costs on the performance report of a specific manager.Most models that measure performance in the private sector are tied to profits--for example, profit percentage (profit divided by sales), return on investment (profit divided by initial investment), or residual income (profit minus a deduction for capital costs). Profits are seldom a viable measure at the cost center level, however. Rather, performance is most often measured by comparing actual costs against a budget. A variance is defined as the difference between the amount budgeted for a particular activity and the actual cost of carrying out that activity during a given period.Variances may be positive (under budget) or negative (over budget).Performance data can be developed for management purposes independent of the budget and control accounts. This kind of performance reporting has been used in the justification of resource requests and in the assessment of cost and work progress where activities are fairly routine and repetitive. Under this approach, units of work are identified, and changes in quantity (and, on occasion, quality) of such units are measured as a basis for analyzing financial requirements. The impact of various levels of service can be tested, and an assessment can be made of changes in the size of the client groups to be served. This approach is built on the assumption that certain fixed costs remain fairly constant regardless of the level of service provided and that certain variable costs change with the level of service or the size of the clientele group served. Marginal costs for each additional increment of service provided can be determined through such an approach. With the application of appropriate budgetary guide-lines, these costs can then be converted into total cost estimates.Variances, budgeted results, and other techniques of responsibility accounting are relatively neutral devices. When viewed positively, they can provide managers with significant means of improving future decisions. They can also assist in the delegation of decision responsibility to lower levels within an organization. These techniques, however, are frequently misused as negative management tools--as means of finding fault or placing blame. This negative use stems, in large part, from a misunderstanding of the rationale of responsibility accounting.Passing the buck is an all-too-pervasive tendency in many large organizations. This tendency is supposedly minimized, however, when responsibility is firmly fixed. Nevertheless, a delicate balance must be maintained between the careful delineation of responsibility, on the one hand, and an overly rigid separation of responsibility, on the other. Many activities may fall between the cracks when responsibility is too strictly prescribed. This problem is particularly evident when two or more activities are interdependent. Under such circumstances, responsibility cannot be delegated too far down in the organization, but must be maintained at a level that will ensure cooperation among the units that must interact if the activities are to be carried out successfully.

What is the difference between target costing and activity based costing?

Activity Based CostingIn an ABC structure, organizational departments that have served as cost centers, where costs are accumulated for allocation to products or services, are replaced by organizational activities through which costs are viewed. The heart of ABC is to trace and account for the pool of fixed overhead costs and show that they are really variable. The crucial aspect of ABC is its focus on the causality and variability with respect to operations and resource consumption in organizations.This focus can be examined in detail using four categories of activities and consumption: unit-level expenses, batch-level expenses, product-level expenses, and facility-level expenses. Unit-level expenses very proportionately with the production volume in units. These costs are typically materials and supplies. Batch-level expenses are incurred as a batch of products is manufactured. These expenses are setups, quality inspection, and procurement. Product-level expenses are related to the activities performed to support specific products in a company's product line. These costs are typically seen when a company makes engineering and product design changes. Finally, facility-level expenses are common to various product lines, and cannot be logically attributed to specific products. Examples include the plant superintendent's salary and property tax on the plant.If properly implemented, ABC can become a powerful tool for a company in costing products and services, evaluating performance, formulating pricing strategies, and making product and customer mix decisions. Recent studies have found the first benefit from ABC is the realigning of the involved organization's expenses from functional categories and departments to activities and business processes. The information gained from ABC was to be used to make decisions on outsourcing, eliminating nonessential activities, and improving efficiency.The hardest part of ABC implementation was reported as identifying and measuring cost drivers. The identified drivers were used to connect activities to products, customers, or other cost objects. ABC reveals that low-volume, complex products tend to be more expensive than more traditional standard cost systems have indicated.Additionally, pertinent actions are required to turn the ABC findings into actual cost reductions to improve the companies' bottom line performance. Usually, insufficient time exists for senior management to establish profit priorities. Simply, the radical changes brought on by ABC create a problem in that management is not able to respond quickly enough or use the information to the greatest advantage because it requires them to break with everything they know about their business. Meanwhile, the radical change is hindered by most companies being unprepared to make radical changes or being willing to make changes, but ill-equipped to make the necessary changes to take full advantage of the information.ABC is only effective when the possible changes are identified in advance and then planned for before implementation. Companies need an explicit plan for line managers to execute desirable actions based on ABC. Thereby, desirable actions could be taken in the areas of costing products and services, evaluating performance, formulating pricing strategies, and making product and customer mix decisions. Without such an explicit plan, ABC may never reach beyond the finance or other group that developed the model. Target CostingTarget costing is a market-driven system of cost reduction, focused on managing costs at the development and design stages of a product. The Japanese believe that cost reduction activities, especially in automated plants, carried out in the production stage of a product have a limited effect. The effect is limited because processing methods, type of equipment, production flow, and other aspects of the production environment related to workers and quality are determined and fixed at the product planning stage in an automated plant.Target costing reveals a direct link between the marketplace, corporate long-term profit goals, and cost management practices. The process begins with finding, through rigorous market research, a quality product that can appeal to potential customers. The expected price at which this product is most likely to appeal to customers is also determined by the new-product team. This sales price generally reflects not current, but future, market conditions and reflects the team's best efforts, although the price may change over that product's life cycle. Based on the company's long-term profit plans, the new product's target profit is calculated and is subtracted from the expected sales price to arrive at the allowable cost. By design, the allowable cost is too stringent to achieve through current technologies. The cost estimates are based on current engineering and production technologies. The target cost is set somewhere between the allowable cost and the current estimated cost.In calculating the target profit, Japanese companies use the rate of return on sales (ROS) rather than return on investment (ROI). ROS is more technically convenient to relate profit to low-volume products. This practice reflects Japanese manufacturers' tendency to focus on the profitability of the portfolios of related products rather individual products. After the total target cost is set for a newly approved product plan, the engineering planners and cost management personnel divide the total target cost for the product into various product cost elements based on the engineering design and cost requirements. The achievement of the target cost requires intense value engineering (VE) activities and close cooperation among departments, such as engineering, production, and marketing.Value engineering (VE) was first developed by General Electric and is geared toward producing innovative, yet cost effective, product features that will satisfy customers' needs. The features have already been determined based on rigorous market research. The sales price incorporates the appealing features based on the market research.For products and services under VE, functions are defined, and costs incurred to perform those defined functions are measured against the functions.One of the primary reasons that Japanese managers find target costing so attractive is its compatibility with the management strategies they use to deal with the shortening product life cycles in today's market. They need to monitor the profit and cost performance in short intervals because they want to recover their investment in a short period of time. Target costing allows companies to translate the cost reduction strategy into a series of equivalent actions according to the relationships to the defined functions. This ability to translate the target into actions is very powerful because cost accounting is connected to products very closely, which workers find very easy to understand. The close connection is in contrast to the loose connection between cost accounting and various functions and products in standard cost systems.

How is the tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to?

Add your answer:

Budgeting with Prepaid Cell Phone Service?

Advantages and disadvantages of standard costing?

What are the limitations of management accounting information?

Explain the concept of responsibility accounting?

What is the difference between target costing and activity based costing?

The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as?

Is often referred to as the tendency toward disorders in a system?

What mineral has the Tendency to break with rough or jagged edges?

Aristotle referred to the tendency of the tragic hero to make a critical error in judgment as?

Which animals eat bananas?

Is Sonic the Hedgehog polite?

The tendency of an atom in a compound to attract electrons?

The natural tendency of molecules to move from higher to lower concentrations is what?

What is the best description for imperialism?

What is trichottilmania?

Are whirlpools natural hazards?

What is the most frequently occurring value of a data is a measure of?

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