Improving the bottom line with budget incentive programs

Article Abstract:

Business cost savings are seldom reported on the bottom line because of management motivation to spend the entire budget. This problem exists because most organizations use fixed, one-year budgets. Fixed budget cost savings are undermined when management does not stress the importance of achieving bottom-line savings, considers zero-fixed budget balances at the end of the year desirable, or attempts to adjust budgets through cuts of 10 to 20%. Managers also fear that their next year's budget will be cut if the current one is not spent. Each budget period should begin with realistic budgets using flexible or multiple-year bases. Areas should be identified in which cost savings are appropriate and in what amounts. Leftover funds should be reported at year-end and the parties responsible identified. Both management and employees should be rewarded for one-time savings, year-end and multiple-year savings, and leftover budget funds.

Finance, Business budgets, Cost control

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Applying overhead: how to find the right bases and rates

Article Abstract:

The widespread use of highly automated manufacturing processes has greatly reduced the role played by labor costs in total manufacturing costs. In such highly automated manufacturing environments, overhead costs related to such variables as material quantities and machine variables have began to play a greater role in the calculation of total manufacturing costs. As such, cost accounting methods must be carefully weighed using bases that ensure that factory overhead costs are accurately reflected. The use of regression analysis is particularly valuable in this regard as it is a reasonably objective way of identifying the appropriate cost application bases that should be used in cost accounting procedures.

Manufacturing processes, Manufacturing

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