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Difficulties in cost reduction
1) Resistance by employees to pressure to reduce cost usually because the nature and purpose of the campaign has not been properly explained to them and they feel threatened by the change
2) They may be confined to a small area the business 9e.g to one department) with the result that cost are reduced in one cost centre only to reappear as an extra cost in another cost centre;
3) Efforts to cut material and labor cost may erode confidence in established system for estimating material usage and labor productivity standards;
4) Cost reduction campaigns are often introduced as a rushed desperate measure instead of a carefully organized exercise.
Testing the Slope The strong point of the relationship among the dependent variable and each of the independent variables can be determined using 3 methods: 1) Correlation
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What is Direct material cost variance It can be defined as the difference between the standard costs of direct material specified and the actual cost of direct material used.
Engineering method These methods are based on the use of engineering analysis of technological relationship between inputs and outputs e.g. method studies and time and motion s
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Scenario - Ahi Corporation is one of your clients in Hawaii. The company had a good year last year and owes the IRS $100,000,000, due on March 15. There are no penalties or interes
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