Cost Relationships and Behaviors

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Cost Relationships and Behaviors

By | December 2010
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Cost Relationships and Behaviors

The owner of Guillermo Furniture Store like managers at other companies uses results and data from various departments to make business decisions. Decision-making is not a separate job function from management however decision-making is a key function to being a manager within any organization. When making a decision that will effect the entire organization a manager must look at data across all affected and non-affected areas in order to make an educated decision as to how the change will effect each department and the organization as a whole. Recently the owner of Guillermo has been considering other business and production options in order to maintain his business while growing profit and controlling costs. When making decision like this for an organization the decisions are tied with various other departments and functions within the company, such as coordinating, planning, and controlling (Horngren, 2008). The first step in decision-making when considering an organization change is to see how items like costs will have a direct relation on various other departments and activities. Properly defining cost relationships and behaviors can affect the decisions made by management in a many ways. Some changes can result in cost drivers and these drivers produce additional cost growth in other departments resulting in additional costs to be incurred throughout the organization. The owner of Guillermo is considering adding a new innovation line to increase production. This new line would be a cost driver for the organization. Costs would be increase in the human resource department because more employees would need to be hired and trained to work this new equipment and new management for these new employees would be needed. Additionally, this new line could increase demand and result in an increase to production hours and an increase to the shipping department. Longer work hours in all these departments will drive up hours...

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