Sunday, January 26, 2020

Cost Volume Profit Analysis: Advantages and Disadvantages

Cost Volume Profit Analysis: Advantages and Disadvantages â€Å"Cost Volume Profit Analysis is not appropriate in an environment where companies produce many diverse products†. Cost volume profit analysis is the study of the effects of output volume on revenue, costs and profit (Horngren, Sundem and Stratton). The most common use of cost volume profit analysis is to find break-even point in terms of number of units sold. In its simplest form cost volume profit analysis works for single product companies. But most of the companies produce more than one product. Sales mix is the relative proportion of quantities of different products that comprise total sales. When sales mix changes, break-even point changes and so does the profit. Like any model, cost volume profit analysis is based on certain assumptions. This paper looks at the applicability of the assumptions, especially for a company producing more than one product. Most of the assumptions in cost volume profit model are based on the linearity of cost and sales with units. Major elements impacting cost are sudden increase in fixed costs, gain in worker efficiency and higher bargaining power of the company. Similarly revenues are non-linear because companies give varying discounts to different customers. Assumptions made in cost volume profit analysis: Unit selling price remains constant. This implies that the price of the product or service will not change as sales volume varies. In reality the situation is different as reduced selling prices are normally associated with increased sales volume and this supports the supply-demand hypothesis which states that lowering of price will result in higher sales and vice-versa. It is a common practice in the business world to offer different discounts to different customers based on the volume of purchase and the strategic importance of sale. Companies offer bulk discounts to larger customers. Managers often reduce prices as volume increases to attract more customers. Also stiff competition means selling product at discounts during lean periods or during festive times. Bigger companies producing more than one product have often more than one sales manager and they have their own targets. Each sales manager would adjust his sales volume and price to maximize his products profits and this may not result in ideal sales mix for the whole company. Hence the assumption of constant sales price is rarely applicable in today’s dynamic world. The realistic sales-output relationship is more like a curve than a straight line. And when a company is selling more than one product, the analysis of break-even point under multiple non-linear relationships becomes more difficult. The behavior of costs is linear (straight line) over the relevant range. This implies the following assumptions: Costs can be categorised as fixed or variable. In a large organisation with multi-product it becomes very difficult to organize costs into fixed and variable. Not only there are a large number of costs involved but also there are a large number of cost drivers acting on those costs. Under such circumstances segregating costs into fixed and variable is a very tedious and time consuming job. Unit variable costs are fixed and constant. It is possible that unit variable costs remain fixed under circumstances like where a company produces just one standard product. Most businesses enjoy benefits of economics of scale as their production increases in terms of Higher trade discounts; Better credit and financing terms. The above benefits result in reduction of variable cost per unit with increase in number of units. The assumption of linear variable costs doesn’t hold true in reality and will result in a situation where the relationship between variable cost and output is a non-linear relation (Williamson). Also when a company sells many products, unit variable costs can’t be identified properly and hence not known. It is hard to classify variable cost to each product. As an example, a superstore sells thousands of products at different prices. Calculating break-even point in terms of number of units sold would be meaningless. In such scenarios, companies can use total sales and total variable costs to calculate variable costs as a percentage of total sales. Fixed costs remain fixed over a wide range of activity. Companies, based on their experience and studies, can analyse fixed cost over a range of activity. But it would be improper to assume that fixed costs would remain constant over a wide range of activity. In a multi-product company, different products will take different unit time of various production facilities. A change in sales mix may not be met by existing fixed capacity and involve setting up of further facilities resulting in higher fixed costs. Many times fixed cost has a step change and a particular fixed cost is applicable for a range of production only. Because of sudden change in fixed costs, unit costs can vary a lot just near the step change point. In case of multi product companies, because of change in sales mix, it becomes difficult to access which product has caused the change in fixed costs. The efficiency and productivity of the production process and workers remain constant. Under economics of scale, efficiency of production processes increases with increase in production of units. Higher production levels should result in lower variable cost due to higher productivity. This means that assumption of constant unit variable costs doesn’t hold true when there is a change in productivity and efficiency. It is easier to calculate efficiency gains in a single product business. But for a company involved in multiple products, it becomes difficult to track efficiency gains in each process. In multi-product organizations, the sales mix remains constant over the relevant range. It is hardly a scenario where all products perform as per budget expectations in terms of number of units sold. Let’s first examine the scenario where sales-output relationship is a straight line. If products have different contribution percentages, change in sales mix would change overall contribution. A change in sales mix is now basically a question of working out new contribution to sales ratio which is a weighted average based on the number and contribution percentage of each product sold. Change in sales mix would change the contribution ratio and hence the break-even point. If now sales-output relationship is a non-linear one, it becomes much more difficult to calculate contribution percentage at different sales mix. The use of computer programming has made the task of calculations much easier but managers can miss the learning by just focusing on overall break-even point and profits. Fearon (1960) reasoned that the problem of maintaining a constant product-mix in a multi-product company may not be that serious because of the following main points: Break-even analysis is not just to give exact answer, it is more to throw light on the problem areas for management; Break-even point should be used as approximation and as an area rather than a point; Over time, multi-product companies reach a stable product mix which changes slowly. Hence constant product mix could be a good approximation for such scenarios; and Also if company uses constant margin over the cost for all products, then it is much simpler to use cost volume analysis. For companies adopting this pricing strategy, sales mix is not a complex issue. Ignores the time value of money. Cost volume profit analysis doesn’t take into account the time value of money. All cash flows are taken at face value. In real world, there are differences in timing of cash inflows and outflows. Companies have to pay for buying stock, workers salary, marketing and distribution before they can realize sales. Companies pay interest on any money borrowed to finance their working capital. Companies operating in high margin products can still manage to ignore the time value of money but companies with low-margin products have to take into account interest charges. There is no change in inventory levels at the beginning and end of the period. This is hardly the case as most of the companies have work in progress at the beginning and end of a period. It can be a coincidence that the inventory levels are same at the beginning and end, but very rarely a company would plan inventory levels in such a way so that there is no net change in inventory during a period. The task of managing inventory with multiple products is even more difficult. This is not a major issue as companies do stock taking at the end of a period for financial records. But the change in prices over the period and interest on working capital should be taken into account for proper cost volume profit calculations. Fearon (1960) suggested some techniques to incorporate the product mix in a multi-product company for cost volume profit analysis. Though he suggested five different ways of adopting simple cost volume profit analysis in a multi-product company, he himself wasn’t fully satisfied with any of those solutions. But he mentioned that the sales mix could be approximated to benefit from the cost volume profit analysis. With all its shortcomings and assumptions, cost volume profit analysis can be used to look at the profitability levels. Companies producing multiple products in today’s dynamic world should carry on the analysis with a view to look at the results as an approximation and not the definite answer. Management should use the results to highlight problem areas. CONCLUSION Cost volume profit analysis is a common tool used to find break-even point in terms of number of units sold. Assumptions used in cost volume profit analysis are debatable because of linearity of cost and sales price. In real world, both cost and sales price remain fixed only over a narrow range and are impacted by elements like improvement in worker efficiency, bulk discounts both in purchasing and being offered to clients and competition. When a company produces more than one product, a change in the relative proportion of quantities of different products changes the break-even point and profit. Because of the non-linearity and change in sales mix, cost volume profit analysis will not give a correct answer but could be a good approximation of what levels of production should a company target to break-even or to make certain level of profits. Management should use the analysis to look more at the problem areas and profitability of products rather than finding exact profit numbers. BIBLIOGRAPHY Fearon, H. E. (1960). â€Å"Constant product mix – A limiting assumption in B-E analysis†, National Association of Accountants, NAA Bulletin, July 1960, Pg. 61 Horngren, C.T., G.L. Sundem and W.O. Stratton. â€Å"Introduction to management accounting†. Prentice Hall International, Eleventh edition. Williamson, D. â€Å"Cost Volume Profit Analysis: Its assumptions and their pitfalls†, (http://business.fortunecity.com/discount/29/cvpass.htm), date 21 January 2007

Friday, January 17, 2020

Children and young people developent

There are many transitions a child or young person will have to go through in their lives, this will start from a very early age and continue through to adulthood. The first time away from a main career or parent is a huge transition and can be very traumatic for a child, especially if they are left with someone they don't really know very well. Babies form attachments with mall careers and people they see on a regular basis.It is important for them to realize that their career is going to return, this cannot be explained to a young baby so it is only by the career leaving and then turning that a baby would realize they are going to return. The baby receiving positive attention, cuddles and someone talking to it In a calm manner would help to reassure the baby whilst the career was away. If this was handled negatively within the first few months of a babies' life then it could have a negative impact on their feeling of security and self-worth at a later date.Those children who have e xperienced an Insecure attachment where sensitivity to their needs has not been met or understood respond to challenge with less confidence and face adversity with rater uncertainty. The ability to tolerate and manage change is essential to healthy living and development; however, those children who have experienced an insecure attachment will be less equipped to manage changes than others. (Young minds in school) The birth of a younger sibling is another huge transition for a child and can cause confusion, possible feelings of being pushed out or ignored as oppose to feeling happy and content.When a new baby is born Into a family unit it Is very Important that any existing children are not made to feel left out. If the new baby was to receive instant attention the existing child could begin to feel unimportant, ignored and ultimately unloved which could lead to the child having conflicting feelings about the new sibling and long lasting emotional affects. Although they may be overj oyed at having a younger sibling they could also have conflicting feelings and feel jealous of all the attention the new baby receives.This could cause the child to display anger and Jealousy at times towards the baby which could later lead to problems for the siblings In building a close, positive relationships, fighting to take attention from each there and being overly competitive. It could also have a negative impact on a chills feeling of self-worth and confidence which could cause in-security issues which could last into adult hood. Starting nursery, changing schools, moving house or to a new area can be traumatic and emotional for a child or young person of any age.The feeling of the unknown entity, not knowing what to expect, settling Into a new environment and possibly not knowing anyone and having to make new friends can be a very emotional and upsetting time. It can be very worrying for a child wondering If they are going to fit In, will people like them, are they going t o get bullied. All these Issues can feel overwhelming to a child and If the transition Isn't handled or dealt with sensitively then this could lead to insecurity issues and affect their feelings of self-worth and confidence. Toilet training and completing simple personal tasks like achievement for a young child.Not all children find this as easy to master as others. It is important to praise and encourage any progress the child makes, no matter how small or it could again affect the chills feeling of self-worth and confidence if they re made to feel like a failure or constantly compared with the progress of another child. A child will need constant encouragement in any area they are learning to do things for themselves no matter how small the progress may seem. This will help them to have confidence in their choices and achievements, assist in building security, self-worth and individuality.Choosing study options ready for entering higher education can be a very worrying time for a young person. Support and guidance during this time, choosing what will be relevant to their long term plans ND what they are realistically capable of achieving is very important. This should be handled sensitively so the young person feels they have made their own decisions and confident they are capable of achieving their goals. Negative comments when receiving guidance and support could cause them confusion around how they feel regarding their academic capabilities and leave them feeling unsure and self- conscious.Parental divorce or grief can cause a child or young person huge emotional trauma. It will often cause feelings of blame and maybe even feelings of abandonment. Sometimes when parents become divorced a young person can feel they have to support the parent that is left at home or maybe feel guilty about the parent who has left the family home and maybe lives alone. If a family member has passed away the parents or even siblings may not appear to be coping and the young p erson may again feel responsible for their family members.Their own needs may not be met due to caring for others and their possible feelings of abandonment or blame may not be dealt with. It is crucial a young person feels supported during this transition and receives any help or counseling they may require. If this support is not received then the child could carry feelings of abandonment and blame into adult hood which could have detrimental effects on a young person. They may have issues around trust and struggle building positive relationships.A young person being away from the family home into care is a massive transition and can cause major trauma for a child or young person. The thought of going to live with potential strangers, often only being able to see their family periodically and contact possibly having to be supervised is a huge transition for a child or young person to have to go wrought. They will often have come from homes where there is little or no structure and often no real boundaries for them to follow. This can be very distressing when they are suddenly placed in an environment surrounded by structure, boundaries and routine.If this transition isn't handled sensitively it can have detrimental effects to the young person and their feeling of belonging. Although the home they have left may have been unsafe or unstable it was still their home and what they have been used to. The transition period can often be an unsettled period of time while they lid positive relationships and learn to trust the people caring for them. Building these relationships will hopefully have a positive impact on their future outlook and enable them to have confidence in themselves and any choices they make.It will also help with their self-image and self-esteem and show them that they can rely on someone else to help them with situations they may find difficult. Eventually they will they want does actually matter. Ultimately we aim to not only show a child what is deemed acceptable and appropriate behavior but also that they are as important as anyone else and deserve all the same life chances. Their wishes and feelings are very important and people do care. Along with these changes there are a number of others, such as puberty, sexual awareness and activity.There will be a change in their body and possibly emotionally which isn't always easy for a teenager to understand or deal with. Confusion surrounding sexuality and the unknown entity of sex and discovering who they are can be a very troubling and unsettling for some. Leaving home and adapting to being alone and having to think and do everything for homeless. Budgeting as well as shopping, cooking and cleaning. Not having someone there all the time. The need for developing independent skills such as budgeting and proportioning can be a very traumatic time.Realizing how much things cost when they haven't been used to having to pay for many items within the home. The loss of mobility for some children can be a massive life changing transition. The need to learn new skills in order to complete tasks or even Just to manage getting about, often in a different way to what they have been used to. A number of the above transitions could affect a child's confidence, feelings of security and self-worth if they were consistently handled in a negative way. As we have explored there are many transitions a child or young person will go through.Many can have long lasting effects and if not dealt with appropriately as the transitions arise can be detrimental to a young persons' feelings of self-worth and confidence later in their life. Handling transitions in a positive manner and having support, guidance and someone to turn to they can trust can have a huge positive impact on their future choices in life, giving hem confidence in themselves and hence improving their feelings of self-worth, Many of the children I look after have not been positively supported in many of the above transitions which has resulted in them lacking self-confidence, security and self-worth.They often have very low self-esteem and don't really have the ability to handle emotional situations in an appropriate manner. Instead of being able to discuss feelings they will become abusive or even violent at times. Often seeking comfort by self-harming or running away from any issues and putting themselves in unsafe situations and participating in risk taking activities. We strive to educate the young people and arm them with coping strategies to help them deal with things in a safer, more appropriate manner.By staying firm, not giving up on them and showing them that we care and are there to help them deal with any issues or situations that may arise we will hopefully show them that it is safe for them to trust, build positive relationships and rely on someone else for support. This is often hard for a young person to understand when they have felt constantly let down, unworthy and insecu re. They may have been abused or sexually exploited which has added to their lack of self-respect and self worth.Never really had the chance to build positive, appropriate relationships and don't really understand how to do so. They show promiscuous behavior and can use sex to either get what they want or as a form of personal control or release. The support and secure home base they receive, along with the non-judgmental positive relationships they will be encouraged to build once living in our home will start to equip them with the security and confidence they lions.

Thursday, January 9, 2020

Coursera Specialization Certificates Worth the Cost

Coursera is now offering online â€Å"specializations† - certificates from participating colleges that students can use to demonstrate completion of a series of classes. Coursera  is known for offering hundreds of online free-to-the-public courses from colleges and organizations. Now, students can enroll in a pre-determined series of courses, pay a tuition fee, and earn a specialization certificate. Certificate options are continuing to grow and include topics such as â€Å"Data Science† from John Hopkins University, â€Å"Modern Musician† from Berklee, and â€Å"Fundamentals of Computing† from Rice University. How to Earn a Coursera Certificate In order to earn a certificate, students take a series of courses and follow a set track in each course. At the end of the series, students prove their knowledge by completing a capstone project. Is the cost worth the certification for these new Coursera programs? Here are a few of the pros and cons. Specializations Allow Learners to Prove Their Knowledge to Employers One of the major problems with Massively Open Online Classes (MOOCs) is that they don’t give students a way to prove what they’ve learned. Saying you â€Å"took† a  MOOC could mean that you spent weeks poring over assignments or that you spent a few minutes clicking through freely available course modules. Coursera’s online specializations change that by mandating a set of required courses and keeping track of each student’s accomplishments in their database. New Certificates Look Good in a Portfolio By allowing students to print off a certificate (usually with the sponsoring college’s logo), Coursera provides physical evidence of learning. This makes it possible for students to students to use their certificates when making a case for themselves at job interviews or demonstrating professional development. Specializations Cost Much Less Than College Programs For the most part, the cost of specialization courses is reasonable. Some courses cost less than $40 and some certificates can be earned for less than $150. Taking a similar course through a university would likely cost much more. Students Earn Certificates Through Demonstrating Their Knowledge Forget about a big test at the end of the series. Instead, after completing the designated courses, you’ll demonstrate your knowledge and earn your certificate by completing a capstone project. Project-based assessment allows students to get hands-on experience and removes the pressure of test-taking. Pay-As-You-Go Options and Financial Aid Are Available You don’t have to pay for your specialization tuition all at once. Most online certificate programs allow students to pay as they enroll in each course. Surprisingly, funding is also available for students that demonstrate financial need. (Since this is not an accredited school, the financial aid is coming from the program itself and not from the government). There’s a Huge Potential for Program Development While online certificate options are limited now, there’s a huge possibility for future development. If more employers begin seeing the value in MOOCs, online certificate programs may become a viable alternative to the traditional college experience. Specializations Are Un-tested In addition to the pros of these Coursera certificates, there are a few cons. One of the downsides to any new online program is the potential for change. More than one college or institution has rolled out a certificate or credentialing program and later eliminated their offerings. If Coursera is no longer offering these programs five years down the road, a certificate with the seal of a more established institution may be more valuable on a resume. Specializations are Unlikely to Be Honored by Colleges Online certificates from accredited sites like Coursera are unlikely to be honored or considered for transfer credit by traditional schools. Online certificates programs are sometimes even seen as competing institutions by colleges that are eager to hold on to their online learning market share. No-Cost MOOC Options Can Be Just as Good If you’re just learning for fun, there may be no reason to pull out your wallet for a certificate. In fact, you could take the very same courses from Coursera for free. Certificates Can Be Less Valuable These certificates may be less valuable when compared to other non-accredited training. A certificate with a college’s logo may be a good way to make your resume stand out. But, be sure to consider what your employer really wants. For example, in the case of technology courses, many employers may prefer that you earn a nationally-recognized certification  rather than earning a Coursera specialization certificate.

Wednesday, January 1, 2020

Jean Piaget s Influence On The Way We Understand Children

Mildred Parten and Jean Piaget are two theorists that have had great influences on the way we understand children. Piaget constructed the idea that a person’s thinking passes through four stages and as the person grows, their way of thinking changes thus entering a different stage. He emphasized mostly the preoperational stage, which is for ages two to seven years old. In this stage children are seen as illogical thinkers but they do engage in make-believe games by using objects for purposes other than their actual intended use. Between the ages of four and seven, they still do not think logically but they become interested in games that have rules, structure, and social interaction. Unlike Jean Piaget, Mildred Parten did not see types of†¦show more content†¦In the process of picking a subject, one boy stood out to me the most as all the children sat down and listened to a story being read by one of the teachers. The boy was having a hard time paying attention and ke eping calm, which were the things that drove me to observe him. Towards the end of my observation I found out I was observing a four-year-old boy named Brandon. The entire building was split into two classrooms. Based on my observation I assumed that they were split into age groups. Overall, the room and the outside area where my observations took place were nicely organized and family-friendly. The classroom was divided into two sections with different floor types; a wooden floor and a carpet floor. The wooden floor side of the room had multiple designated areas. The biggest area was an eating area which is where the children could have lunch on chairs and tables adjusted to their size. Another area was where the children could wash their hands, this part of the room consist of paper towels, soaps, mirrors, and a sink. To the left of the sink there was a first aid kit with a fire extinguisher. To the right of the sink there was the restroom door, the restroom consisted of multiple toilets next to each other. The restroom also connected to the other classroom. The wooden floor side also had backpack/jacket hangers for the kids along with