a) Activity-based costing is a methodology that identifies functions in a company and
assigns the cost of each activity according to actual consumption by each. It emphasizes on
activities needed for producing goods and services. Then according to the use rate of any
product, the activities are shared and divided among the single production. The method
determines a more accurate cost and the gross profit for any product.
On the other hand, target
costing is a pricing method used by companies that reduce the overall cost of produced goods
and services. It helps to reduce the cost of production with the help of research, engineering, and
design. With target costing, the company plans for the production cycle of a product, its cost,
price points, and margins of achievement.
The management team must have a powerful tool that
monitors every progress of the product. Target costing is more advantageous in a more
competitive market with high production of goods and services.
b) Customer profitability is the profit that a company either makes from offering
services and goods to consumers individuals or groups over a specified period. Customer
profitability can be explained specifically as the difference between the revenues earned from
any cost associated with production and customer relations. Customer profitability is measured
individually by customer, market segment, or channel. Most companies measure their customer
profitability by tracking resource consumption and costing final outputs.
Customer profitability analysis adds values to an organization. It helps a company to
understand its customers. Also, analysis helps to identify the type of customers that buys the
product. Have such adequate information a company can lay out strategies and make decisions
that will maximize their customer profitability. Through the analysis, the company realizes new
market opportunities targeting new customers.
c) Information technology is a tool that can provide business value to an organization.
Information technology can be a tool for empowering employees and retaining them in the
organization. When the management integrates accessible technology into the business
operations, employees there will be various benefits. It will help improve great employees,
recruit employees in a large pool of candidates, and enhance teamwork. Communication as a
business value will be fostered by an Information Technology.
An IT system that meets the needs of the employees increases their productivity. Information technology reduces cost in the
business. Execution of various functions is made easy by use of information technology.
The IT department should be aligned with the overall strategic objectives of the company.
This alignment will maximize the values that are contributed by the IT department. there should
be a shared understanding of how the IT software and services will contribute to business
objectives over time.
A shared focus on resource expansion and the tradeoffs that the company is
ready to make. A feasible relationship between the IT department and the rest of the business
operations should be fostered.
d) Enterprise resource planning (ERP) is a business management software that allows a
company to use a system of inclusive applications to manage the business and to automate back
office activities related to services and human resources.
Within SAP, the company has to train its employees and executive members. Tools such
as OpenPS4MSP are used to download and upload forms to the MS project, which is very
successful. It is used with the integration of FI/CO, IM, MM, SD, and HR modules. This offers
the company the benefits to managing multi-million dollar project.
Measuring the progress of a project as planned is done under the following factors. The
units completed are evaluated to measure the resources and time used that can be projected to the
future progress. The start and finish method that focused on the accomplishment of the project as
evaluates its success or failure. Weighting covers a wide range of data and is an effective way of
determining the progress of a project.
e) Financial statement manipulation is an existing problem in most corporates. Two
common ways that are used to manipulate financial statements. Inflating current earning on the
income statement by manually increasing revenue and gains. Also, decreasing current period
expenses is a similar was of increasing the profit. This method makes the company look better
than its actual position. the other method includes deflating the earnings on the income statement
by reducing the revenue or increasing the expenses. The reason behind this manipulation is not
obvious as the first approach. The company seeks to look worse to hide all bad financial
information in one period so that the firm will seem stronger in the future. The good financial
statement is pushed to a future date when the company is more organized.
An investor should hire a personal auditor to analyze the financial condition of the
company. This will give the investor a detailed understanding of the company’s financial status.
The investor should do a critical comparison of all financial statement to identify any alteration.
The investor should avoid high investment to buy time of understanding the internal operations.
Also, a potential investor should analyze ratios and have a good understanding of book value
ratios, prices, and sales ratios to gauge the reasonability of the financial data.