Financial managers play an important role in an organization. They are required to manage an organization’s financial activities in line with its underlying goals and objectives. Financial management activities aimed at increasing and organization’s profit shence contributing to subsequent growth of a firm. A firm’s investment in productive projects or in any production process has a great impact on the returns the shareholders will acquire. This comes in as a result of taking a safety investment which is certain of making profits to the firm. Earnings from the invested funds of such projects ensure that the shareholders are contented with returns and the price of their shares in the market.
Financial managers should conduct forecasting before the product is introduced into the market so as to ascertain their long term financial gains. Through forecasting, financial managers determine the performance of certain commodity in the market and when that particular commodity is going to clear in the market. However, forecasting the prospects of a certain commodity in the market usually suffers various challenges. Some factors such as government policies and regulations always bear an adverse impact on the marketability of products. For instance, banning of a certain product in the market affects the marketability of the products and adversely affects its profits.
Financial managers also have the option of revising their inventory management techniques. The presence of a huge stock of inventory is risky because of the presence contingencies. Nobody knows how the situation will be in the future even though the financial managers may at times try to forecast some issues. However, in some instances, financial managers may lack the capacity to influence some conditions they are required to meet by the government. As a result, the financial managers should be flexible in the inventory techniques they use. For example, at times when the firm keeps a lot of stock, and it happens that there is a ban of such a product, the firm may incur huge production and storage costs.
A review of a projects lifecycle may also act as a method of monitoring and reducing losses emanating from the production and storage costs. During the final stage of a product’s lifecycle a product reaches its maturity stage and there are always ways in which the product can be modified to avoid losses. Financial managers can diversify the product such that many varieties of the same product are available in the market. This technique is widely used to avoid the exit of products from the market. The technique also helps to prevent competition among rival firms.
Financial mangers face a lot of uncertainties especially when marketing and selling products. The market is ever dynamic, and this makes firms to be inclined when selling their products. The demand of a particular product may be high at one time, thus encouraging the production of similar goods in large amounts with the aim of maximizing economic profits. This will in return increase the supply of a commodity in a market hence lower its prices. Therefore, it is important for financial managers to keep watch of the dynamics of a financial market in order to prevent losses from occurring.
Additionally, financial managers can come up with methods such as diversification or product differentiation. This enables the firm to have an alternate product(s) at hand for disposal in the market thus mitigating the risks of producing one type of commodity.
Dumping of products in overseas markets is not ethical. Most products have been found to have significant health problems which have resulted to their prohibition. These prohibited products are then sold at low prices in foreign markets. However, charging low prices for these products does not guarantee their usage in foreign countries. Therefore, dumping of products is only be done by firms with the objective of gaining profits.
Regarding the case of dumping of pajamas, it should not be advocated despite the argument that the persons receiving them are aware of the health hazards accompanied with their usage. However, this is usually not the case since most of the organizations involved in such trades aim at making profits in less developed countries. Since the main goal of an organization is to maximize profits, such organizations will not be willing to incur losses as a result of the large stocks of prohibited products in their countries. Therefore, they end up dumping the same pajamas overseas where they sell products at lower prices in order to get rid of the stocks.
Large organizations have found a means through which they can dispose the pajamas. They protect themselves incurring losses by dumping products in overseas markets and they encourage the sale of prohibited products in these overseas markets by charging low prices. Even though the pajamas were said to cause kidney cancer, there is still dumping of products in the less developed countries. Having the pajamas in any place around the world should also be prohibited since the same diseases, which come along with their usage, would still prevail. Thus, every government should try to adjust its rules and importation policies in order to curb such imports from finding their way in the country.
On the other hand, the exportation of Dalkon Shield should also be discouraged. With the product having been prohibited in U.S.A, it’s usage in other countries should also in turn be prohibited. There have been many adverse effects on health such as blood poisoning and uterine perforations that have been caused by Dalkon Shield. This, therefore, causes the usage of the product to be unhealthy. Third world countries should try to improve their skills in testing the health standards of dumped products. The lack of proper facilities and testing materials renders the importation of such products in third world countries. Thus, governments should intervene in the importation of such products and make sure that there are proper and efficient facilities for testing their usage safety.
Regarding the argument that, any birth control instrument can work well in third world countries compared to none, is not justifiable. The fact that have been a high rate of deaths occurring during birth in third world countries does not also justify the reason for the exportation of such products. In addition, usage of Dalkon Shield may have a long term negative impact on the health of the patients. It is for this reason that other measures should be taken to prevent deaths during birth but not take the risk of using this device. Therefore, the exportation of Dalkon Shield should be highly discouraged and research should be conducted in order to find other ways on how to prevent deaths during childbirth.
Process costing is an accounting term which is used to describe the costs of producing identical products which cannot be separated in production process. Process costing is used as an alternate method for job costing when the products produced are similar. There different types of process costing which include: weighted average costs, standard costs, first-in-first-out costing.
The weighted average costs are usually the simplest of the three methods. This method involves taking into consideration all production costs and adding them together. Thereafter, production costs should be allocated to the units produced.
Standard costing basically involves the issue of standard costs. This method is almost similar with the method mentioned above. However, production costs are allocated to the units produced but not their actual costs. The accumulated standard costs are, thereafter, compared with their actual costs. First-in-first-out method is used to calculate costs as in period depending on the time a product is produced. The products produced first are the ones which begin the costing process.
For instance, let’s say a company produces certain product which goes through different departments for processing. The following are costs involved in first department: direct material and conversion costs. These production costs are then converted in to costs per unit in the current department. Production costs are then shifted to the next department, and the processing costs included to the units’ costs.
A good example where process costing occurs is in the food production. In addition, process costing can also be applied in companies which produce products that are difficult to allocate actual costs.
Job order costing refers the costing system where costs are added together depending on the jobs. This type of costing is majorly done when the products produced are many and different. In this method, costs are derived back to jobs and then the costs divided by the units’ number in order to get the average cost.
Job order costing embraces several steps. The first step in job order costing involves, placing an order for a certain product followed by issuance of an order permitting the production of the product. The labor and raw materials that will be used to produce such a commodity should also be ordered together with the issuance of the production order. After order allowing the production of the goods, the assignment of manufacturing expenses follows. The actual costs that will be incurred, its materials and the direct labor that will be used to produce the good are charged to the work-in-progress. Under job costing, the following documents are required: job cost sheet, materials requisition form and time ticket.
Job cost sheet is a document which is used to trace information such as the job number, when the job was started and completed, information regarding the customer, the total costs of the job among many others. The materials requisition form ensures proper assignment of material costs to the particular jobs in progress. Time ticket is another document used in job order costing which must be completed in order to assign the labor costs.
Production of multiple products is much difficult compared to the production of just one product. This is due to the fact that costs of producing those products have to be kept in a proper manner. An organization will, therefore, incur a lot of costs in the production process. Therefore, proper management of the job records is necessary to enable operations to run smoothly.
Job order costing is widely used in industries which tend to sell their products in batches. This method can also be applied in the service industries like in hospitals and in accounting firms.