Posted: September 17th, 2017

General

Please respond to the following posts. Each answer needs to be one paragraph at least and provide a reference, in APA format, 1. Some managers avoid obtaining personal relationships with any direct reports because they do not want to be at a disadvantage in resolving conflict or negotiating with a subordinate. Does this idea seem reasonable to you? Why or Why not. I believe that the manager should not have the personal relationships with the direct reports for several reasons. First, the manager becomes biased. It is hard to combine the friendship and business at the same time, if the friendship takes the priority than success of the business suffers. It affects the managers judgment. Second, absence of fairness in resolving a conflict. In my former job, the team of analysts socialized after work and had strong friendship with each other. When one of the analysts was promoted to the Vice President position, it became obvious that she could not resolve the conflict fairly in our team, sometimes with the management. She knew what we felt and how each of us saw the situation. She tried to stay as a friend to all of us but it could not continue any longer if she wanted to be effective in her position. She decided to cut any personal relationships with us. From that day everything was about the job and our responsibilities. Third, revealing the personal information. Some of our analysts in conflict situation tried to manipulate with the personal information about the manager, which, of course, was unethical and not connected to the problem. In my motherland, Kazakhstan, the work environment is completely different than in the United States. It is important there to build the personal relationships with the employees and the management. The employees would spend weekends with their families together and celebrate birthdays/ weddings events. Of course, the employees feel frustrated and offensive when the manager provides negative feedbacks, or is unhappy with their performance. It was very hard for me to get used to the fact that I was not longer a friend with my manager and build the professional relationships. In my opinion, the personal friendship at work between the manager and the employees makes the work environment insufficient and ineffective. The best scenario if when all employees are equal in the eyes of the superior (boss). 2. The concept of avoiding personal relationships with a direct report because I do not want to be at a disadvantage in resolving conflict or negotiating does not seem reasonable to me. My leadership style relies heavily on building relationships with and mutual trust with my employees. I see an appropriate personal relationship as a continuation of that trust partnership. One of the elements of a successful employee-manager relationship is trust. When the sense of trust is strong between an employee and manager, it adds efficiency to other elements of workplace productivity (Root, 2015). Our text speaks to the importance of coaching and how coaching can be a paradigm shift from traditional management, which focuses heavily on control, order, and compliance. Coaching is a partnership for achieving results. Several characteristics of coaching contribute to its close relationship with leadership (DuBrin, 2016). Leadership styles that use relationship building as a key component can be viewed as the opposite of control, order, and compliance. A strong personal relationship with an employee can help when there is a change in the organization, promote strong employee development, reduce turnover and inspire loyalty. 3. Overhead costs contain both a fixed and variable component. As such, an increase or decrease in volume does not result in a proportionate increase or decrease in cost. Explain how flexible budgeting is used in absorption costing to address that concern. Costs are associated and traced to product (or inventory) instead of volume or expensed seperately. Absorption Costing Definition (Accounting Tools, 2015): A method for accumulating the costs associated with a production process and apportioning them to individual products. This type of costing is required by the accounting standards to create an inventory valuation that is stated in an organization’s balance sheet. A product may absorb a broad range of fixed and variable costs. These costs are not recognized as expenses in the month when an entity pays for them. Instead, they remain in inventory as an asset until such time as the inventory is sold; at that point, they are charged to the cost of goods sold. Absorption Costing Components (Accounting Tools, 2015) The key costs assigned to products under an absorption costing system are: Direct materials. Those materials that are included in a finished product. Direct labor. The factory labor costs required to construct a product. Variable manufacturing overhead. The costs to operate a manufacturing facility, which vary with production volume. Examples are supplies and electricity for production equipment. Fixed manufacturing overhead. The costs to operate a manufacturing facility, which do not vary with production volume. Examples are rent and insurance. Instead of budgeting with income, profits generated AND Expenses, the expenses, including overhead get linked or traced to the product in inventory itself. In this model of costing it seems like the expenses get absorbed into the product and allows for a flexible budget of not expending right off the top. It provides for payment of expenses coinciding at the time with product sales. More money stays in the bank for the business and less overall administrative expenses are incurred for continued expense reporting. 4. Absorption cost systems are widely used in financial reporting for calculating the book value of inventory and cost of goods manufactured. ( Zimmerman, 2014). Absorption costing means that all of the manufacturing costs are absorbed by the units produced. In other words, the cost of a finished unit in inventory will include direct materials, direct labor, and both variable and fixed manufacturing overhead. As a result, absorption costing is also referred to as full costing or the full absorption method. Absorption costing is often contrasted with variable costing or direct costing. Under variable or direct costing, the fixed manufacturing overhead costs are not allocated or assigned to (not absorbed by) the products manufactured. (accountingcoach.com,2015) Flexible budgeting allows budgeting annual overhead to vary with volume. Overhead is not treated as a purely fixed cost by rather as a mixture of fixed and variable costs. (Zimmerman, 2014) 5. The application of manufacturing overhead to production is based on a pre-determined application rate of the cost driver. Discuss cost drivers and how they are determined for the cost allocation. In short, a cost driver are those fees or expenses related to the act of doing business or producing business objectives. Manufacturing businesses typically know the close to precise costs for generating its products and what those items (cost drivers) are. The Investopedia (2015) defines and further explains ‘Activity Cost Driver’: A factor that influences or contributes to the expense of certain business operations. In activity based costing (ABC), an activity cost driver is something that drives the cost of a particular activity. A factory, for example, may have running machinery as an activity. The activity cost driver associated with running the machinery could be machine operating hours, which would drive the costs of labor, maintenance and power consumption of running the machinery activity. Activity-based costing is a type of costing that identifies activities within the business and estimates the resources required to fulfill each activity. An activity cost driver is a factor that effects the costs associated with an activity. Activity-based costing allows managers to determine the costs to perform an activity as well as the costs associated with not performing the activity For example, when a production line has to wait for a certain part to arrive from an external distributor or other manufacturing line, the manager can quickly determine the true cost of waiting for the part. Activity cost drivers attempt to provide a more comprehensive view of the actual costs of an activity, such as a manufacturing process. As Way (2015) from SmallBusiness.Chron explains: By analyzing cost drivers, businesses can better understand the correlation between costs incurred and the activities that cause them. Furthermore, a cost driver provides the basis for cost allocation among business units that directly benefit from the cost incurred. A cost object may appear related to different activities, but in determining cost drivers, a business must choose those that correlate mainly with the cost object, best facilitate management control and are the easiest for cost measurement. To determine cost drivers, a cost object must be first identified. The purpose of having a cost driver is to better distribute the cost of a target cost object among its cost beneficiaries. Discuss why prospective rates are used instead of historical rates in the application of overhead. Overhead costs can change frequently and over time, so utilizing historical rates may throw off the accuracy of cost drivers and put a business at financial risk. The cost allocation planning is done with projected future time in mind as well so prospective rates are used to more accurate account for projected costs. 6. A cost driver is the cost measured by an activity that is most associated with total costs in the activity center (Zimmerman, 2014). There are two types of cost drivers; a resource driver and an activity driver. The resource driver refers to the contribution of the quantity of resources used in relation to the cost of that activity and the activity driver refers to the costs incurred by the activities required to complete a particular task or project (Cost Driver, 2007). Business departments can benefit from some costs and the cost driver helps determine the cost allocation of those departments that will gain the most from the cost. Using a cost driver is a way to allocate indirect costs to products, jobs, and departments. According to Aldridge (2004), “direct labor is an example of a cost driver because it creates a cause-and-effect relationship with other costs. For example, increasing direct labor hours will most likely require having more supervisor hours” (para. 4). Zimmerman (2014) describes overhead as “all manufacturing costs that cannot be directly traced to a product and examples include indirect labor and materials, plant depreciation, insurance and property taxes, and plant management salaries” (p. 669). A prospective overhead rate or predetermined overhead rate is set at the beginning of the year and is used to apply any manufacturing overhead to products. Some of the benefits of using prospective overhead rates include it is useful in bidding cases to determine quote size; it enables jobs to be cost as soon as they are completed which helps in providing cost information to management; and the rate level can even out any differences which may be caused by variations in actual overhead costs and actual activity (Jain, 2000). These benefits make using the prospective method more beneficial than the historical method. The historical method is based on past history thereby unchangeable. By using budgeted historical data, management gains information such as the overhead costs a company has incurred in the past.