Second, it causes great harm in the continuity of information outsourcing firm with them they do not have a professional line, the environment and business background that compliments their needs. So they have to make sure that they not only guarantees the right staff, with the right set of skills, but also a partner with outsourcing companies that understand their industry, as well as industry. Outsourcing could result in less demand for highly skilled labour and fewer job opportunities in the country of origin . As a result there may be pressure on wages , it could eventually lead to a decline in the competitiveness of the home economy. Lastly, attention is the loss of intellectual property in knowledge transfer to other countries and, in the concrete, to the enterprise partners who can use it for their own purposes.
Third, a firm under intense cost or competitive pressures, which does not see IT as its core competence, may find outsourcing a way to delegate time-consuming, messy problems so it can focus scarce management time and energy on other differentiators. Next, several financial issues can make outsourcing appealing. One is the opportunity to liquidate the firm’s intangible IT asset, thus strengthening the balance sheet and avoiding a stream of sporadic capital investments in the future. Also, outsourcing can turn a largely fixed-cost business into one with variable costs. This is particularly important for firms whose activities vary widely in volume from one year to another or which face significant downsizing.
For example, there are companies which have volatile assets whose prices will keep changing. The volatility will result in a series of gains and losses which may not depict the real picture of gains and losses of the organization over time (Drury & Colin 137). Secondly, using this accounting approach greatly discourages investors in the sense that fluctuations in the net income are frequent. The investors may get discouraged where losses often occur and opt to withdraw their investment. If the historical approach were in place, the volatility would be minimal, and it would not affect the investors that
Through the frameworks and issues, we concluded that while current setup would cause some budgetary discrepancies because of the lack of loyalty between the divisional controllers to the corporate controller, changing the organization structure of Martex would cause a disparity between the division manager and the divisional controller thus resulting in an anxiety in their working environment which is too costly as compared to maintaining the current setup. I. Case Context Rendell Company is experiencing some difficulties in implementing its modern control techniques due to the irking relationship between the divisional controller and the corporate controller (Mr. Bevins) resulting in an added fat to the organization’s budgets. Now, with these problems, Mr. Bevins is interested with the organizational structure of Martex if this will be the solution of the current problem. II.
The table below lists the effect that discrepancies in some of the more important parameters might have on a firm that is striving for stability. Parameter Effect on Firm Inventory If inventory strays significantly from desired inventory, the firm will be continually making production adjustments. As mentioned above, inventory levels have a dramatic impact on the firm. If inventory levels are higher than desired, the firm will have to pay for costly warehouse space. If inventory levels are much lower than desired, the firm will lose revenue in the form of lost orders.
It also stunts any scope for improvement or innovation as it is too focused on sticking to the set benchmarks. This often leads to poor overall performance of the organization in the long run which in turn affects the going concern of the business. Secondly, it utilizes a single, volume-based cost driver which leads to the distortion of the cost of products. It traces overheads to products or services usin... ... middle of paper ... ...osts and where to apply efforts to curb inflationary costs. This can be of particular value in tracking new products or customers and also solves the cross-subsidies problem linked to traditional costing system by separating overhead costs into different cost categories or cost pools.
The lack of transparency on price and sales makes it more difficult to sustain collusion. If firms do not adhere to individual prices it is harder to detect deviation and punish it. Tacit collusion It is an illegal agreement thus the absence of a written agreement. When, firms that are competing do not want to engage in competitive behavior such as cutting the price, advertisements and promotion they come up with unwritten rules of collusive behavior such as: price leadership. A price leader then emerges setting a general industry price high enough that the least cost-efficient firm in the market may earn some return above the competitive level.
Likewise, non-adherence to the ethical and legal principles of accounting can influence the business negatively. Notably, companies that are involved with fraudulent financial reporting are on the receiving end of direct impact of such practices in both the short and the long run. The impact may not only be in the form of financial loss but it can be in the form of reputational damage also. Notably, banks who meet the funding source of companies involved with fraudulent financial reporting will be in the verge to lose its investment. It has been noted that in general scenario, fraudulent financial reporting is conducted with the intention to resent an improved positioning of the business in front of the investors and other stakeholders.
Companies might see the need to inflate their inventory to recover lost resources and in turn can provoke other companies to outdo them. With the losses of its market share, resources and time it will also lose its customers, partners, and the general public trying to convince them that they are still worth putting their trust in. The shareholders and investors start to pull out of the business because of loss of confidences that the company can provide them a secure holding in their finances. With bribery, asset misappropriation and embezzlement a company’s resources are not being used the way that they should be, causing the company to be inefficient. Resources that would be used for important operations within the business to secure customers, partners, and clients are instead being wasted or benefiting the people who misusing
Total quality management believes that it is more expensive to rework products than it is to do them right the first time (Chartered Quality Institute, 2016). In other words, with total quality management a product’s quality cannot be compromised for the sake of saving money. This is well illustrated by budget variances and how accountants must look at them under total quality management. One may believe that a favorable price variance is automatically a good thing; however, this drop in price is often a result of a lesser quality product. The same idea can be applied to the rate variance, while not always the case a favorable rate variance can mean unskilled workers.