Professional Documents
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https://www.researchgate.net/post/How_will_covid_pandemic_impact_banking_sector
Q1. Cost behavior has already changed as covid 19 has almost destroyed the
business all over the world. Due to complete or partial closure of entities, fixed
costs have increased per unit. Critically evaluate the cost composition of any two
organizations and prepare comprehensive report catering the activities before
and during the pandemic? Done written
During the novel coronavirus (COVID-19) pandemic, governments around the world have introduced
lockdown measures and travel restrictions that severely reduced the trade of many small
businesses. Governments are concerned about business closures, loss of income and
unemployment in the markets concerned and are considering further interventions especially as the
danger from the virus is beginning to subside.
A school is a service institution. In its statement of financial position, one could see its
revenue is mainly tuition fees from students. And its highest expense is the salaries of
instructors or teachers. Other than salaries, operational expenses like electricity, water,
maintenance, etc. is of large amount in the expenses. That is before the pandemic, these
are true. Operational expenses are huge in amount.
Another cost that will be avoided is the operational expenses. Air conditioners, heaters,
ventilations will not be turned on anymore if classes will not take place inside the classroom.
This will result to around 70% cut in the operational expenses. Another is the instructional
student support expenses like instructional materials, examination papers, etc. will also be
cut up-to even 100% because all exams will be paperless as they will be conducted online.
Schools also provide free transportation to students especially huge in land area schools.
Transportation cost for students may also be avoided because no one will be roaming
around the campus. Plus school activities cost also may also be cut into at least half
because outflows for decorations, guests, food, etc. can be minimized and maybe
converted into online activities instead.
What we have mentioned above are just part of the costs that may be avoided. However,
also stated above, enrollees may also decrease which will result to lower revenues.
Therefore, school fees may be reduced to invite enrollees. Miscellaneous expenses for
students may be cut to 50%. This will definitely improve the number of enrollees.
Since everything is almost online, the school shall also invest in property plant and
equipment that may help better delivery of online classes like having a better learning
management system (LMS) and better online connection for teachers. The school shall also
be ready once classes inside the classroom shall resume. It has to make sure that from the
revenues it was able to come up will be saved so that if there are city or state or country
ordinances as to how to conduct classes, the school shall be able to adhere.
These are just some of the areas that should be looked into during the pandemic. The
school should make sure that its cash flow shall still be the same as before the pandemic,
or better so that if worst case scenario will come, the school is ready to adjust and adapt.
The components of cost are the fixed costs and the variable costs which makes the cost
structure of an organization. This cost vary with a company between product lines,
divisions, or business units because of different types of operations they perform.
Before covid-19 pandemic, organization operated normally since there were limited
expenses and increased production and output depending on the demand and supply.
Therefore the variable costs and fixed costs were operating effectively with no effect or
changes.
However, after the pandemic struck, there has been different impacts on the economy. The
level of output and production rate has been affected since demand and supply is relatively
low. For example the leather company has been producing very low quantities of goods and
products since the demand is low. This has relatively led to the rise of fixed costs per unit
leading to changes in the variable costs due to changes in the business activities.
Cost composition:
The term cost composition refers to the cost components of a finished products. The cost
composition of a product tells us how much of the cost incurred is direct cost, indirect cost
and how much portion is overhead. The major costs of any product or services are its direct
and indirect costs, and the overheads that has been incurred by the company.
The organization who is involved in the catering service is going to notice a lot of different in
the methods that have been followed by the company for the purpose of completing the
work. Let us talk about how the catering activities would be different before and during the
pandemic. The cost of catering would increase and not because of the increase in direct
cost but due to increase in precautionary controls and measures of the organization.
Before pandemic, the catering cost would generally be comprised of employees' wages,
food, utensils, cleaning and other related costs. The utensils could just normally be wasted
by the workers and could be used again and again without much costs.
But, during the pandemic, the costs of catering services are going to increase because of
the increased risk and preventive control. The purpose of catering services would still be the
same but it would also incur some increased costs and the reasons could be as follows:
The food needs to be prepared with extra precautions and the material should also
be sanitized, thus adding to more costs.
The employees will be in less numbers, but they needs to be checked regularly, and
they should also be provided with necessary tools to keep them safe from
pandemic.
The utensils costs will also increase as simple washing would not be enough, and
they needs to be sanitized against as well.
There should also be necessary precautions arrangements made at the place of the
event that would also increase the overheads of the catering activities.
Q2. Inventory manager are worried as the consumption of certain component have been halted
entirely or decreased drastically. Suggest how the various quantitative tools for inventory
management can be applied with certain modifications. Done: Written
1. INVENTORY MANAGEMENT
Inventory management, or inventory control, is an attempt to balance inventory needs
and requirements with the need to minimize costs resulting from obtaining and holding
inventory.
The first question, ‘how much to order’ relates to the problem of determining economic
order quantity (EOQ) and answered with an analysis of costs of maintaining certain
level of inventories. The second question, when to order, arises because of uncertainty
and is a problem of determining the re‐order point.
Some quantitative tools for inventory management that can be applied with certain
modifications in this situation are as follows:
EOQ: The objective of EOQ (Economic Order Quantity) is to minimize inventory costs
by ordering ideal quantity. It helps in freeing cash tied in inventory. This formula is used
to order maximum units and reduce frequency of small buying. The formula uses
number of units and cost of storing inventory as variables of measurement.
1) MOQ: Minimum Order Quantity (MOQ) is the minimum number of units a supplier
expects the buyer to buy. If the retailer wishes to buy any quantity less than the
MOQ, then the supplier won't sell.
2) ABC Analysis: This technique divides inventory into three categories in order of
their importance. A category are the most important products which contribute
maximum to the company's profits, B category are neither most important nor
least important to the company's profits but fall in between the two and C
category are the least important small transaction items which do not affect the
company much.
3) JIT Inventory management: Just in Time (JIT) inventory management is a tool to
reduce inventory costs. It manages inventory in a way where raw material is
ordered from suppliers as per the production schedules or as needed instead of
keeping dead stock and blocking funds.
4) FIFO & LIFO: First in first out (FIFO) and last in first out (LIFO) are methods used
to decide cost of inventory. FIFO method suggests that the older stock should be
sold first to maintain freshness in the inventory while LIFO suggests that the
latest stock should be sold first before the market tastes change.
5) Batch Tracking: This is the method used to monitor inventory with similar
qualities in groups or batches. It also helps in keeping a track on the expiry and
defects in the batches.
6) Reorder point formula: This inventory management formula takes into account
the company's purchase and sales cycles for calculating the inventory
requirements.
7) Demand forecasting: This method uses historical sales data to forecast the
customer demand. Basically, it estimates the demand that customers plan to
purchase in future.
Done written
The hotel industry is a service industry which provides paid temporary housing or simply
lodging services, the use of budgets establish a detective control for its daily operations but
often, budgeting and determination of a standards of a small local hotel is a big challenge
for its owner. Budgets provides them guidance for incurring expenditures while standards
sets some targets of quality service and to stand creditable.
Cleanliness: daily check of cleanliness in morning and evening of almost every part
of hotel.
Security : Security for customers life and belongings (materials) should be prioritized
such as guard, camera and other monitoring system should be installed
Telephone service, Cable TV service and other services must be anytime available
(24*7)
Proper facilities to banqueting and conference services
Professionalism and knowledge of staff: Hire staff with good communication skills
and expertise in their craft.(service)
Customer service- Looking after the customer wellbeing after each hours until check
out
Manners and courtesy
Sales opportunities : Build sales relationship by offering them the better tariff option
with better service which will retain the customer and attract new customers
Presentation and quality of food and drinks
Factory overheads are manufacturing costs incurred other than direct materials and direct
labor. These overheads are cost pools and allocated to units produced.
Variance is the difference between actual costs incurred and standard costs. It may be
favorable or unfavorable.
Factory Overhead Accounting : This type of accounting means account the overhead
expenses of factory, that means while production in factor there are some indirect expenses
which belongs to factory/ manufacturing but not directly related to product, such accounting
includes identifying the cost centers, cost drivers and allocation of cost to appropriate cost
center, which is known as Factory overhead allocation.
Acme co. has implemented Activity Based Costing for factory overhead allocation,
accountants properly identified and organized the activity in chronological order then
classify the cost drivers for cost allocation and hence after allocation it is found that
unnecessary cost to unprofitable activities has been eliminated
Factor overhead is 36% of overall production cost, since 2012 there is a mild decrease in
the factory overhead due to consistency of cost efficiency in accounting and overhead
allocation.
Variance:
From factory overhead applied and allowed to direct material usage, the variance is
properly ascertained and considered in key decisions regarding procurement of raw
material and purchasing of machine. The spending variance and usage variance (all
categories are positive) while Direct labor price variance is negative (first time in last 3
years).
For calculating the variance, the expenses are recognized according to the period (accrual
cost accounting)
The Factory Overhead Variance analysis can be conducted for the following:
1. For Material
2. For Labour
3. For Overhead Costs.
The findings for any company related to above concepts will result in following:
Company needs to divide its segment in proper departments which will help them to
analyse the cost centers and the contribution of each department in the profitability
of the company as a whole.
After dividing the departments, proper overheads needs to allocated.
After the allocation of overheads variance needs to be calculated for each expenses
to verify if they are favourable or Unfavourable.
Proper measures needs to be taken if any variance goes unfavourable for the
company.