Showing papers on "Overhead (business) published in 2002"

The costs of activity-based management

Abstract: Activity-based costing and management are now the stock-in-trade of a lucrative industry, with at least one Big Six consultancy operation devoted wholly to their promotion. Both techniques represent a major extension of accountability in the modern corporation, into a zone previously defined in accounting terms as fixed overhead. The mechanics depend on treating the staff department as a mass-producer of repeated acts of routine service (‘activities’) performed ‘for’ particular cost-objects, usually products. By treating these activities as performance indicators, payroll budgets can be linked to activity volumes thus creating pressures for the casualisation of staff employment. The activity frame of reference, particularly when linked with ‘value analysis’, also encourages the stripping-out of all staff work which cannot be accommodated within its definition of activities. This threatens a dumbing-down of staff departments in which non-routine initiatives aimed at competitive advantage in fields such as human resource management or marketing may be stifled because they cannot be accommodated within the language of accountability imposed by ABM. These arguments are concretised through an examination of the ABM treatment of one of its favoured targets: the purchasing function. The contrast between this and the supply chain management approach advocated by practitioners and academics who take the function seriously is a stark illustration of the limitations of ABM as an approach to the management of staff activity.

How Does Foreign Entry Affect the Domestic Banking Market? The Brazilian Case

Abstract: Using bank level data for Brazil in the 1995–2001 period, this paper examines the extent of foreign ownership in the domestic banking market. It also separates and analyses the domestic banking system as to private and state-owned institutions, given the almost 50% market share of state-owned banks in Brazil by the deposit criteria. The net interest margins, overhead, taxes paid, and profitability of foreign and domestic banks are compared with domestic banks achieving higher profits than foreign banks, which contradicts the empirical evidence in the literature. Also, further estimation results suggest that an increase in the share of foreign banks leads to higher profitability of domestic banks, which is opposed to the literature. Finally, while domestic private banks have higher net interest margins and profits than foreign banks, state-owned banks have lower net interest margin and profits, and higher overhead expenses than foreign banks. RESUMEN. Con base en datos bancarios brasilenos del per...

Causes and Costs of Unused Logging Production Capacity

Abstract: Over 80 logging crews provided weekly production data, business demographics, and quarterly expenditure information during 2000 and 2001. These weekly data serve as a quantitative narrative of the workweek, explaining the number and types of loads hauled, the amount of labor employed, the number of moves, and the extent of use of contract trucking. The crew also included an estimate of the number of loads that they could have produced but did not and the reason(s) for the loss production opportunity. During 2001, each crew also supplied cost information on a quarterly basis. This included the total expenditure of the crew, broken down into consumable supplies, labor, equipment, insurance, contract hauling, and administrative overhead. The causes of lost production were examined and reported. Using these same production data, the fixed and variable cost of each crew and the estimated lost production, we examine the potential impact on logging cost per ton caused by this underutilization of capacity.

Early cost management practices, state ownership and market competition: the case of the Royal Textile Mill of Guadalajara, 1717-44

Abstract: Existing literature on the deployment of cost techniques in early public sector organizations largely relies on archival evidence gathered from late eighteenth and nineteenth-century settings. Arguably, these contexts are characterized by a number of idiosyncratic characteristics that advise caution in generalizing conclusions beyond the institutional elements that forged those settings. Our investigation examines the case of the Royal Textile Mill of Guadalajara (RTM), a setting characterized by state ownership, competitive markets, organization of production around medieval guilds, and recruitment of foreign experts to conduct productive operations. Our findings show that the management of RTM deployed cost accounting techniques that comprised aspects such as control of raw materials and waste, control of labour and management, and allocations of overhead to product costing. We also find evidence which departs from predictions that standards relating to the control of raw materials should have preceded ...

Ii. regional production functions and social overhead capital: an analysis of the japanese case. in: transport infrastructure

Abstract: Unless the quantitative mechanics that generate agglomeration economies are known, regional economists remain unable to know to what extent infrastructure investment is effective in raising the income level of low income regions. This paper attempts to answer the above question by estimating production functions based on an unprecedented wealth of data for Japanese regions.

Strategic Routeing and Environmental Impact Assessment for Overhead Electrical Transmission Lines

Abstract: High-voltage, high-capacity overhead lines are the economic and reliable choice for the bulk transmission of electricity throughout the world. The routeing of transmission lines is a complex process, and in the UK requires a balance to be struck between statutory obligations, engineering requirements, economic viability, land use and the environment. Transmission line routeing projects can rightly generate considerable public interest and debate, but issues often focus on local effects such as visual amenity rather than the wider benefits of the project to society as a whole. Given the extent of their public and regulatory scrutiny, the environmental statements of such schemes must be objective and transparent in the approach adopted to the routeing strategy. The approach outlined is based on the premise that the major effect of an overhead transmission line is visual and the degree of visual intrusion can be reduced through careful routeing.

Case study - overhead costs analysis

Abstract: Construction projects become complicated and fragmented so that many specialty contractors are involved. In such changed environments, a general contractor’s overhead costs are increasing comparable to direct costs. In addition to an increase of volume, activities consisting of overhead costs play an important role in coordinating different participants who include different specialty contractors and client. This paper reviews traditional overhead control and critiques problems thereof through literature review, interviews with professionals, and data collection. It proposes a new overhead cost control method, called profit-point analysis (PPA) applying activitybased costing (ABC). It is followed by a case study presented to exemplify the new method.

Short-term Perceptions, Corporate Governance and the Management of R & D in Italian Companies

Abstract: The aim of this paper was tomeasure the short-term perceptions of FinanceDirectors and how managers react to pressuresfrom the financial and corporate governancesystems in the management of R and Dexpenditure and innovation. The studyreplicates Demirag's U.K. study.Results do not support the proposition that thefinancial and governance systems behave in ashort-term manner in general. The bankingsystem in Italy tends to be neutral as regardsthe firm's decision making and management hasthe freedom to steer the firm forward in aframework of long-term profitability andgrowth. Italian firms are not perceived asbeing possible candidates for take-overoperations, which might exacerbate the problemof pressure to deliver short-term profits atthe expense of long-term R and D investments.However, in some sectors and under certain sizeand ownership structure conditions short-termpressures are felt more strongly: they aremainly science-based sectors as well as sometraditional sectors (engineering and constructions).In higher-pressured firms (HPFs) managementtends to place more emphasis on costs than onproduct innovation and is more likely to view Rand D as an overhead that has to be trimmedduring a recession. Moreover, the controlmechanisms tend toward short-term accountingmeasures. In addition, the prevalent sources ofshort-term pressures – where they are present– are interestingly different in Italy than inthe U.K.: while in the Anglo-Saxon context theyare perceived to come from the market andfinancial institutions, in Italy they areperceived to come from the firm ownersthemselves.

Relative value units and cost analysis, Part 3 of 4.

Abstract: In recent years, the interest in relative value unit (RVU) cost analysis has been on the rise. Why all the excitement? RVU cost analysis places the knowledge, and therefore the power, in the hands of the administrator to negotiate revenues, analyze expenditures, and control costs. Cost analysis at the per (relative)-unit level allows for procedure profitability (or loss) analysis, setting internal fee schedules based on costs, contract negotiation based on RVU cost and utilization, equitable provider compensation packages based on productivity and overhead coverage, and tracking ancillary and referral utilization risks. In short, RVU cost accounting uses the Resource-Based Relative Value Scale (RBRVS) instead of stopwatches and clipboards when measuring clinical costs and activity.

Cost Structure and Profitability of Design Services Industry

Abstract: This paper is a financial analysis of several key parameters that affect the cost structure of design firms in the United States. Using results of surveys conducted over the past 15 years, we have examined the cost trends and profitability of design firms. The firms’ profitability is examined as a function of utilization and overhead rate and expense ratio. The impact of overhead caps imposed by public agencies and the reimbursement of CADD costs in public projects on the profitability of design firms are discussed. To evaluate these factors, the paper first discusses in detail the four elements of cost within the design services industry. These four elements are: direct salary costs, indirect salary-related costs, direct nonsalary costs, and general and administrative costs. These design costs are usually summarized and presented as labor, overhead, and direct nonsalary costs. A detailed analysis of the elements that comprise overhead and the key elements that affect overhead are presented. Profitability...

Chapter 10 – Economic Analysis of Desalination Processes

Abstract: The objective of this chapter is to present elements desalination cost. The presentation outlines components of direct/indirect and operating cost. A number of case studies are presented for the calculation procedure. Also, a comprehensive review of literature cost data is presented. Economics of desalination processes shows that the production cost is divided into direct/indirect cost and annual operating cost. The direct capital cost covers purchasing cost of various types of equipment, auxiliary equipment, land cost, construction, and buildings. Indirect capital costs includes: freight and insurance, construction overhead, owner's Costs, and contingency. The unit product cost of RO process depends on the capacity. Recent field estimates give $0.55/m3 for the large RO project in Florida, USA, with a capacity of 113,652 m 3 /d. Examining recent data smaller capacity units give $0.83/m 3 and $1.22/m 3 for capacities of 40,000 m 3 /d and 20,000 m 3 /d, respectively. The most critical parameters in cost evaluation are the fixed charges (amortization) and the energy cost. Other parameters that have lesser effect on the unit product cost include the cost of chemicals. Further, four case studies for the major desalination processes are presented. All calculations are based on recent economic data extracted from the field data and design studies in the literature.

Developing Effective Training Programs. (Educational Update)

Abstract: Introduction With continued advances in technology, markets become more competitive and management expectations of performance efficiencies increase. No business enterprise can maintain the status quo and improve processes without concerted effort in spearheading innovative change in the pursuit of quality and efficiency. As with other realms of business, there is a considerable body of knowledge to acquire to meet the performance demands of research administration. Research Administrators (RAs), familiar with the cycle of proposal development to program close-out, must be responsive to changes in policies and procedures in their university and department, and must be aware of federal regulations and modifications of sponsors' guidelines. Furthermore, there is a continual need to communicate policies and processes between business administrators, principal investigators, and the research staff. The result is a constant learning curve for both junior and senior research administrators. Training initiatives must prove their worth and are often among the first functions to be sacrificed during economic slowdowns. To survive in such an atmosphere, training must emphasize skills and the acquisition of knowledge in direct support of performance goals. Not only can effective training promote productivity, it can foster personal and professional development, contribute to the progressive organizational environment, help boost productivity, and promote employee morale. Grant (US News & World Report, 1995) notes: Motorola has the most comprehensive employee training programs of any US corporation, and as a result has boosted productivity 139%, sales 18% and earnings 26%. Courses at Motorola University are geared to business strategy. Every employee receives a minimum of 40 hours of instruction per year. Every business, including research administration, has performance issues, but the dilemma of optimum performance is universal. How can the quality of training be enhanced? How might training needs be accurately determined? What training methodologies are most appropriate for different learning objectives? When is training the proper intervention for productivity or efficiency issues? 'What factors influence training besides the material and the trainer, and what control could there be over these factors? The first step in developing a successful training initiative is to consider the issues that influence its effectiveness. Needs Assessment If you do not know what you need, you will not get it. Identifying a need specifically enough to develop initiatives to resolve problems takes expertise, time, resources, and support. Take the example of a headache--just as physical symptoms can have complicated causative factors, so do performance issues in the workplace. Thus, the first step in considering the implementation of a training program is a thorough evaluation and the development of a specific plan for intervention. Consider the example of a department accountant team member who attends Cost Accounting Standards (CAS) training on three separate occasions. Two of the instances are informal informational sessions and the third is a bona-fide workshop complete with additional resource references. Still, after having repeated exposure to the concepts of CAS and to the processes by which the institution responds to these standards, the accounting staff member continues to have difficulty in applying the concepts to work tasks. Specifically, the fiscal technician continues to make errors in allocating expenditures to the appropriate direct (i.e., award) versus indirect (i.e., departmental overhead) accounts. Further consideration reveals not so much a lack of understanding of properly allocating expenditures, but considerable indecision in. confronting the principal investigator (P1) with previous and current inappropriately allocated charges. In this example, all the CAS training in the world would likely not provide the staf f member with the authority or fortitude to inform or challenge a Pi about how award Funds should be spent. …

The other side of outsourcing: Despite the difficulties, there is money to be made running routine operations for other companies

Abstract: The business of being a cog in another company's wheels might not be glamorous, but it can be lucrative. Third-party providers of routine operational services--such as the processing of payrolls, the movement of inventory and goods, the management of data centers, and the provision of extra manufacturing capacity--took in more than $1 trillion around the world in 2000, according to Dun & Bradstreet. What is more, the market for these services doubled in size from 1997 to 2000. Analysts estimated that this eclectic sector, made up of companies that in essence take over activities other companies choose to outsource, would grow by 25 percent in 2001 and could experience similar growth in 2002. What is propelling the expansion? In theory, providers of nuts-and-bolts services have long had a compelling pitch to make to the large and midsize companies that make up their customer base: "Why should you directly manage the routine operational activities that make up a substantial portion of any business? Overhead tasks such as billing and human resources, as well as supply chain processes such as procurement, manufacturing, and logistics, are not an intrinsic part of your business; they are infrastructure activities. Let us manage them for you. As specialized providers of these tasks, we understand how to undertake them better than you can, and at lower cost." Before 1997, however, customers were more likely to nod their heads in agreement than to sign up. For one thing, they were wary of becoming hostage to providers for any activity they handed over--providers that might gradually raise prices and reduce service. For another, customers and providers alike found themselves saddled with interaction costs (such as managing the relationship, monitoring the delivery of services, and coordinating the exchange of information between customer and provider) that had not been anticipated and sometimes exceeded whatever value one or the other party had hoped to gain. And some providers couldn't deliver the promised efficiency or productivity improvement: either they were unable to exploit or even obtain economies of scale, or they couldn't streamline or transform the processes they managed. Ultimately, they did little that a customer couldn't do for itself. But in the past few years, the realities of outsourcing infrastructure activities have changed rapidly. The plummeting cost of communications, the widespread use of standardized interfaces such as World Wide Web browsers, and the quickening pace at which companies are automating data have cut interaction costs sharply. Providers of infrastructure-management services, or "infraservice" providers, have entered the market in increasing numbers, and customers have become more accustomed to them. Providers and customers alike are learning how to structure deals to the benefit of both parties. Even so, we estimate that customers still manage in-house more than 90 percent of their routine operational services--an enormous opportunity for both start-up and established infraservice companies (Exhibit 1). One company that has seized an infraservice opportunity is Johnson Controls, which has expanded from the manufacture of air-conditioning, heating, and lighting systems for buildings into the business of operating and maintaining the buildings themselves, along with their systems. In 2000, the company's facility-management unit posted $1.5 billion in revenue (almost 10 percent of the total), and it is growing at twice the rate of the rest of Johnson Controls. For every such company, however, several firms are languishing. In studying more than 400 third-party providers in various sectors, we found that some, such as application service providers, have struggled from the outset, unable to turn commodity offerings into sustainable businesses. Even in more attractive segments, such as contract manufacturing, certain providers are failing to flourish (Exhibit 2, on the next page). …

The philosophy of performance evaluation

Abstract: When engineering company revenues decline the typical reaction is to cut costs. At engineering companies, that means layoffs because the primary cost in engineering is staff salary. Work is priced with salary costs as a foundation. Other costs-indirect, overhead, and general/administrative-are layered on to generate the multiplier that determines the cost of each hour charged to the customer. So cost cutting begins with payroll and the inevitable performance evaluation or forced ranking. At its core, competitive evaluation based on costs often denies the employer and the employee the benefits of the potential collaborative value creation in a team and pits one individual against another, placing an inherent limit on cooperation. To be fair and to minimize abuse, the process must be as objective as possible. Results should not be a surprise to those being ranked who are aware of criteria. To be valuable, however, it must allow some subjective assessment of value creation but provide enough subjectivity in a ranking process to identify and consider the value of creativity that opens it up to potential compromise. Too often the mandate to cut costs is used to justify targeting those who have fallen from grace in their managers' eyes, and such a ranking process becomes the tool of choice.

The management of overhead costs in construction companies

Abstract: Costs not directly attributable to or recoverable from production and sales are often loosely referred to as overhead costs. In construction, some of these result from the organisation structure, size and form of the enterprise, some apply more directly to site operations and some may lie somewhere in between. Overhead costs largely represent the enterprise’s operational capacity, including aspects of both physical capacity such as plant and equipment and intellectual capacity such as data, records, expertise, experience and knowledge. The fluctuating nature of the construction market periodically compels enterprises, for competitive and survival reasons, to adopt shrinkage strategies. These may include retrenchments and downscaling of office and other facilities and often represents loss of capacity. When markets again expand, replacing lost capacity is problematic. Budgeting for overheads when bidding and recovering them from contract revenues in a dynamic market is a further challenging factor in optimally balancing overheads against capacity. By means of a review of literature and the results of preliminary surveys among large and mediumsized contractors, this paper presents progress on current research into managing overheads in South African construction enterprises. The objective of the project is to promote productivity through optimal management of overheads.