Explicit Cost Dynamics: An Alternative to Activity-Based by Reginald Tomas Yu-Lee

By Reginald Tomas Yu-Lee

Attending to the ground OF the ground LINETraditional fee administration structures more often than not defeat their very own objective by means of prime businesses to make judgements that finally don't optimize functionality. those structures are the basis for judgements which are made during the company. to ensure that companies to extend functionality past present services, a brand new procedure is required that addresses matters comparable to knowing the genuine influence of assorted activities at the backside line-and casting off tools that distort numbers and slender ideas. specific expense Dynamics (ECD) bargains such an alternate, and this expertly written, innovative publication presents an critical creation to the subject.Informative and easy-to-read, specific rate Dynamics:Provides another view and realizing of the effect of prices, activities, and time at the base line of a corporationExplains how this new conception may end up in an total revenue maximizationShows that bills might be regarded as both a functionality of actions played, as a functionality of assets expended, or of timeShows that the adaptation among specific money flowing into and out of a firm is the same as the speed of swap of money. . . and lots more and plenty extra to assist CEOs, CFOs, controllers, rate managers, monetary managers, and others keen on the decision-making procedure enhance their agencies' total backside traces.

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8 Cash That Does Not Exit the C-R Border Does Not Have an Impact on the Cash Position of That Within the Border Situation Initial Cash Income Expenses Resulting Cash Single Married Transfer $100 $150 $150 $ 50 $120 $120 $30 $60 $60 $120 $210 $210 ch-02_YuLee_36490_Wiley 12/27/00 3:53 PM Page 38 38 What Is Explicit Cost Dynamics? 9 Which Costs Count, and Which Do Not? For money leaving the C-R Border, the bottom line is reduced by the amount that leaves C-R Border A direct relationship between profit and cash flow can exist.

13). ch-02_YuLee_36490_Wiley 12/27/00 3:53 PM Page 42 42 What Is Explicit Cost Dynamics? 13 The Usual Suspects Resource Costs Unit rate(s) $ Ϭ Time Examples Salaries Rent Insurance Action Costs $ Ϭ Time $ Ϭ Action Consulting fees Shipping Item Costs $ Ϭ Unit Direct and nondirect materials Resource Costs A resource cost is a cost that would exist if all activity stopped but the organization was still operable. In a case such as this, the company would have to continue paying salaries for the time worked, rent, general electricity, information-technology systems, and other infrastructural requirements of the organization.

Dynamics Dynamics refers to how something changes. The dynamics of costs, as will be shown throughout this book, are not well understood. Existing ch-02_YuLee_36490_Wiley 12/27/00 3:53 PM Page 26 26 What Is Explicit Cost Dynamics? cost management systems tend to obscure the dynamics of costs. Cost functions are monotonically increasing functions. What does this mean? A function whose dependent variable (total cost or sales) increases as the independent variable (units or sales transactions) increases is said to be a monotonically increasing function.

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