Non-accounting Information Needed - Essay Example

The paper 'Non-accounting Information Needed' is a good example of a Business Essay. Make or buy decisions has become so frequent and popular because of global outsourcing. Make or buy decision is the act of making a strategic choice between buying externally and producing it internally. The increasing demand and increased sales in the market for our product mean that we have to increase the products in the market. As a result, we need to conduct this in strategic and operational insight. We must look at the long term effects and position of our company, the government regulations that affect us, our competitors, and the trend in the market (is the demand going to be short term to sustain additional investment in plant capacity). Taking (Burt p23) advice we should produce products that are going to supplement those in the market and ones that will represent our core competencies. These are our strongest areas and will give us a competitive advantage over our competitors. Considering our desire to integrate plant operations, absorb the excess capacity in fixed overhead by the plants and design secrecy to protect our technology, we should make a decision that better serves our customers and the company’s interest. To decide on the make or by decision some key factors are considered. It is these factors that we should consider in order to make a decision that would be the cost-effective one for the future and present as well. These factors are volume/demand, the fixed costs of making the products, per unit cost when buying and per unit direct cost in making those products. These four factors will guide our production department in the analysis. Some of the reasons that we would consider for making these products ourselves. Make or buy decisions can be on many scales that is if the decision is not big and has less impact on our business. We need to consider the pros and cons of buying and making. Since our organization is a big organization with impact decisions, we have to follow a standard method in making the decision. We should include all relevant costs and future costs as well. Relevant costs include incremental inventory costs, direct labor, managerial costs, delivery costs, factory overhead costs, quality control costs, incremental purchase costs, and capital costs. There are no other factors, focused on more varied understanding capability. We would not incur incremental costs if we decided to outsource our products. Also, we would not incur them if we had idle capacity in our plants.

However cost is seldom the only thing to consider in the make or buy decisions, break-even is also a major factor that we should consider. We can summarize the implications of costs by break even. These guidelines are followed in making a buy or make a decision. They are the accounting management information considered to make this decision. Both should be considered carefully before any decision is made. These have their implications on the level of employment, the asset level as well as the core competencies of the company. We can adopt total cost ownership measures for incorporating nonprice consideration in to make or buy decisions to over the implications of employment and asset levels.

Non-accounting information needed We should focus on ensuring that we have the right personnel and expertise to carry out the production. The increased sales and demand for our product means that we have to produce more capacity than we used to there before. This calls for more labor force to meet the demand. With our intention to venture into the ski wear market we have to increase the labor force. The number of employees, the expertise as well as the necessary skills to meet this demand is very important. This would determine if we will be able to maintain our product quality in trying to meet the increased sales and demand. Nonaccounting information to consider is the nature of the market demand, is it sustainable or is it for a short period of time? While focusing to meet the demand we should be considerate and consider the future implications of this. Legal restrictions on supplying goods below the normal list price The international market is a free market and participants are free to buy or sell at the price they desire. Companies can sell at a lower price than the list price if there is abnormal demand or special orders otherwise the company can’t cope with lower prices, they would make losses as selling at lower prices is not sustainable (Charles p56) puts it. Free markets have no legal control over price, though there are legal implications if the company involves itself in illegal trading practices like sale of illegal goods, selling prohibited products or evasion of paying charges to the relevant authorities like trading license and operating without a work permit in foreign countries.