Sometimes a business may accept a special order at a price that is significantly different from the normal pricing proposal. For that special order, the quantitative analysis will focus on the contribution margin. It must be determined whether the contract price of special order exceeds the variable production and selling costs related to the special order. Continue reading
For decision making purposes most of the analysis has focused on short term activities and operations. But, managers must consider some high amount of expenditures which is known as capital expenditures that effect for many years. These expenditure decisions relate to creation of new facilities, large expenditure for vehicles and machinery, conduct a new product research and development and related items where the present cost is high and the payback period will very far to come.
Management must take one of the more difficult decisions which is discontinuation of a business unit that is performing poorly. This kind of decisions can have various effects on the company stakeholders. The tools of Enterprise Performance Evaluation (EPE) help to performance evaluation methods that are useful to identify the lagging sectors.
Very frequently companies must choose between using outside suppliers or produce the goods or service internally. The term outsourcing uses in many functional areas. For example, some companies outsource for processing data, technical support, payroll services and other operational activities for running a business. ‘Make or buy’ is a frequently used term for manufacturing companies.
As an individual, one can probably think of many things that he wishes he could do. He may has taken an evaluation and regretted some ridiculous error. He realizes the information but drop in his performance. The people of the business sector will experience the same emotions. Maybe goods were delivered using expensive overnight express when less costly ground shipping would have worked as well.