The value chain and cost analysis, Managerial Accounting

The Value Chain and Cost Analysis

The behavior of a firm's costs and its relative cost position stem from the value activities the firm performs in competing in an industry. A meaningful cost analysis, thus, examines costs within these activities and not the costs of the firm as an entire. Each value activity has its own cost structure and the behavior of its cost may be affected by linkages and interrelationships with other activities both within and outside the firm. Cost advantage results if the firm achieves a lower cumulative cost of performing value activities than its competitors.

The starting point for cost analysis is to define a firm's value chain and to assign operating costs and assets to value activities. Each activity in the value chain involves both operating costs and assets in the form of fixed and working capital. Purchased inputs make up part of the cost of every value activity, and can contribute to both operating costs (purchased operating inputs) and assets (purchased assets). The need to assign assets to value activities reflects the fact that the amount of assets in an activity and the efficiency of asset utilization are frequently important to the activity's cost.

Posted Date: 12/8/2012 5:48:36 AM | Location : United States







Related Discussions:- The value chain and cost analysis, Assignment Help, Ask Question on The value chain and cost analysis, Get Answer, Expert's Help, The value chain and cost analysis Discussions

Write discussion on The value chain and cost analysis
Your posts are moderated
Related Questions
Identify the management assertions related to each of the fictitious supplier credits and unrecorded amounts in accounts payable using the facts presented

Working capital is a necessary requirement for any type of business activity. Banks in India nowadays constitute the main suppliers of working capital credit to any type of busines

Model Construction The success of a simulation exercise is related to the predictive quality of the underlying model, so that considerable care should be taken with model const

The Rohr Company’s old equipment for making subassemblies is worn out. The company is considering two courses of action: (a) Completely replacing the old equipment with new equipme

The collection policy of a firm is intend at timely collection of overdue amount and comprises of the subsequent. a.      Monitoring the state of debtors (account receivable)


Question: (a) (I) The following equations relate to the market conditions for pullovers at a given point of time: Demand Function: Q d = 1200 - P Supply Function: Q s

The CP introduced in the Indian financial market, for the recommendations of the Vaghul Committee has turn into a well-liked debt instrument of the corporate world. Commercial Pape

Customer oriented or perceived value pricing There is an increasing trend to price the product on the basis of the customer's perception of its value. This method takes into ac