Symptoms of Costing System Obsolescence – a Critical Analysis

Symptoms of constitute System Obsolescence A Critical Analysis 1. ingress Costing Systems ar critical to management because they have monstrous implications for the set and positiveness related decisions made by the management. In a nonmilitant commercialise it may be possible for the backup to hurt its products at a point that is acceptable to most(prenominal) of the consumers and thereby earn abnormal profits. Even in such cases the be establishment determines the extent of profit that is earned by the business. Costing frames carry more richness in competitive merchandises, as the organisation does not have any substantive pricing power in such markets (Oliver, 2004). In exceedingly competitive markets, the prices are determined by the market at the low possible sustenance points for the players. If an organisation fails to manufacture products at the lowest possible represent so as to batten peripheral profits even at the lowest market prices, hen ce the organisation is plausibly not to survive in the long-term. This economic fundamental of pricing in competitive markets would cause wholesome moreover if the organisation is capable of determining the cost of the products accurately. This in turn depends on the appropriateness of be organisation to the market and the external environment in which the organisation exists.

If the cost systems espouse by the organisations are obsolete and are incapable of identifying the costs and accurately mapping them to the products or units, then it is likely that the system would become less helpful for decision-mak ing. Decisions made on the base of inaccura! te and incapable be systems could not only hotshot to losses but also threaten the really survival of the firms in the long run. Chan and Lee (2003) recognise the importance of costing systems and argue that the costing systems should be developed to movement the ineluctably of the environment. They argue that it would be possible to determine whether the costing system is obsolete on the basis of certain...If you want to sign on a full essay, order it on our website: OrderCustomPaper.com

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