Chapter 21 The Relationship of Accounting with Other Business Functions

Chapter 21 The Relationship of Accounting with Other Business Functions

Part 2 Production
-plan and oversees the production of goods
-it liaises with the accounting departments:

• cost measurement, allocation, absorption - measures quantities of materials and time used, cost allocated and absorbed to calculate production costs based on advice given.
• budgeting - decide how many items of what type are to be produced. cost of producing will be determined by accounting and production department and incorporated into the overall budget.
• cost v quality - discuss the features that can be included in products and the raw materials that should be used. discuss which better quality and features justif the extra costs and discuss how to maximise the quality and profit
• inventory - liaise with the inventory section to ensure that there are sufficient raw materials in stock for the production that is planned.

Part 4 Service Provision

-Companies very often provide services to customers.

Charge-out rates

-This is the hourly rate which the company charges clients. It should be higher than salary, as it should include a share of overheads. However, if the charge-out rate is too high customers will not use the service.

Estimating Costs

-Problems arise in determining the amount of overhead to be included in the charge-out rate. Also, if the service takes longer to provide than expected, the company may not be able to pass on the extra cost.

Problems Measuring Benefits

-Market conditions may mean that the charge-out rate contains a very low profit element. The company may question whether it is worth carrying out these services. The problem is that the benefits are intangible and not easy no measure, but nevertheless real.

A company with effective service provision has happier customers that are more likely to buy from the company in future leading to lower selling costs. But it is hard to measure these benefits.