Do Higher Returns Justify Higher Risk?

October 29, 2013 by Jan | No Comments | Filed in Business, Finances, Technology

Do Higher Returns Justify Higher Risk?, ioption review forex binary options binary option tradingIn today’s economic environment it is hard to the average investor to make a substantial return on any investment. There are a lot of mixed signals. For example, the Stock Market is hitting all time highs, and yet, in the USA there is still a huge unemployment problem.

The Fed is printing money and buying mortgage backed securities at an alarming rate. This is not sustainable. But without a housing boom or significant employment surge they really have no choice but to prop up the investment community.

There are some alternatives that do give a HUGE ROI, but these are not for the faint of heart. For example, there is a new form of trading in Binary Options. Imagine Forex type investments in a pseudo derivatives market. Binary Option Trading is relatively new. Most of the brokers are in Cyprus and other offshore types of jurisdictions where the legalities are a little lax. That being said, Binary Option Trading offers the investor the possibility of double and triple digital returns in as little as a few minutes or hours. You predict which way a currency pair will move, take out an option and hope for the best. There are a few brokers who will even refund your first trade if you get it wrong. You can get the full detail of the platform IOptions at this review page. If you have are looking for a high risk/high reward trading opportunity then this is it.

Here’s a link for more info

Do Higher Returns Justify Higher Risk?, ioption review forex binary options binary option tradingOf course, there are a lot of other ways to invest your money. The housing market will come back at some point. The fed is printing money and is actually stalling the housing comeback. Had they let everything collapse and clear there’s a good chance that entrepreneurs would be making huge money in real estate once again. Of course, nobody can tell when the Fed will let that happen.

stocks, Bonds, real estate, they are all risky at the moment. Forex, binary option trading and gold and silver speculation seem to be the riskier way to get a higher return on your money

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Pension: Not Black And White

April 7, 2014 by Rebecca | No Comments | Filed in Business

Pension are crucial for employees live a life without monetary situation. Taking into consideration this requirement of the workers, employers develop a different sort of pension among which specified advantage and defined contribution are the significant types. With these pension prepares comes a stable inflow of money, which is essential for an individual when he is not working. The explanation offered below will assist you know the difference between defined benefit and specified contribution.

You will get your pension based on your earnings during your service and the number of years you served your company if defined benefit is your pension plan. Defined benefit pension plans are essentially of 2 kinds – unfunded plans and moneyed strategies. In unfunded strategies, the employer pays the pension benefits to the employees after retirement. On the other hand, the plan and the employer member’s contribution are buying a fund to meet the monetary needs of the workers. The returns got from specified advantage pension plans are not impacted by the condition of the stock markets, company’s company version or the number of years a person lives after taking retirement, and hence is safe investments for retirement. Specified advantage pension are, however, understood to be less portable and flexible as as compared to the defined contribution plans by some professionals. These pension plans do not depend on the staff members’ capability to conserve as in the case of the specified contribution strategies. This plan is an ideal one for people with lower earnings. Critics also suggest that there is a lack of transparency about the investment schemes in this sort of pension plan. This pension plan is believed to be suitable more, for companies utilizing lots of people as compared to smaller sized firms. Many public sector or government controlled firms adopt this kind of pension method for their workers.

Please read the whole thing…

There are two categories of pension: specified contribution plan and defined benefit plan. The defined contribution plan and the specified benefit plan are both covered by the employee retirement earnings security act (ERISA). The specified contribution plan guarantees dealt with contribution amounts to the pension fund, such as 3 % of an employee’s annual income. The specified benefit plan guarantees predetermined retirement benefits, distinguished by a pre-selected formula, such as a “” specified month-to-month benefit at retirement”" (U. S. Department of Labor). Within each category of pension are a range of specific plan types. A few of these specific strategies are discussed below.

And, Another Thing…

Cash balance plan – specified advantage plan. A cash balance plan, \” defines the benefit in terms that are more characteristic of a specified contribution plan”" (U. S. Department of Labor). When the specific participant in a cash balance plan retires, the benefits to be gotten are determined based on an account balance. “” Increases and minimizes in the value of the plan’s investments do not directly impact the advantage amounts guaranteed to participants. Thus, the investment dangers and rewards on plan assets are borne solely by the employer”" (U. S. Department of Labor).

Earnings sharing plan – is a defined contribution plan. A profit sharing plan is one in which contributions are discretionary and based upon company earnings. This sort of plan offers “” a set formula for determining exactly how the contributions are divided, \” (Internal Revenue Service) among each participant.

Employee stock ownership plan (ESOP) – is a specified contribution plan. In an ESOP, “” the investments are mostly in employer stock”" (U. S. Department of Labor). Generally, the company contributes new shares of its own stock to a trust fund set up for that purpose. Then, “” shares in the trust are designated to individual employee accounts…

Money purchase pension plan – is a specified contribution plan. A money purchase pension plan, \” needs set annual contributions from the employer to the employee’s individual account”" (U. S. Department of Labor).

Another kind of pension plan is the streamlined employee pension plan (SEP). In this sort of plan, workers set up ownership of a specific retirement account (IRA). Employees might make tax-favored contributions to these accounts. Employers might likewise add to the employee owned IRA (U. S. Department of Labor).

The specified contribution pension plan works on the principle that employees are offered pension as per the possessions in their retirement plan account. For making a provision for pension, companies make contributions which are a certain portion of your income. Since of the liberty they provide staff members in choosing the kind of investments to be made from the contributions, defined contribution strategies have actually become popular. So, with this flexibility, every employee will have the ability to pick investments based on their risk taking ability. Many times, employee profit sharing plans are likewise consisted of in defined contribution pension plans. Considering that the earnings of corporations can fluctuate, the quantity which employees will get will likewise alter. There are popular stock bonus offer strategies in which the employees are given benefits in the form of a company’s stock. The cash added to defined contribution strategies is either from the employee’s wage or direct employer payment. There are some limitations on the amount of money that can be contributed and this is governed by the Internal Revenue Service (IRS) area 415 limitation standards. In the year 2009, the total contribution restriction (employee contribution + employer contribution) was $49,000. 401 (k) and individual retirement accounts are the best examples of defined contribution strategies.

In case of defined advantage strategies, just the employer contributions have received tax benefits, while in the defined contribution plans, both employee and employer contribution get tax benefits.

In specified advantage strategies, the investment risk is taken by the employer for getting control of investments, whereas in the defined contribution plans, staff members take the investment risk for investment rewards.

Termination of the pension is costly in case of defined benefit plan while in case of specified contribution strategies, there are no termination expense problems.

Both strategies have an impact on employee retirement. While defining advantage plans encourage early retirement, specified contribution strategies urge staff members to increase their professional profession period.

In defined benefit plans, employers may manage the responsibility of rising inflation, while in specified contribution all inflation risks need to be borne by staff members.

Generally, defined advantage strategies have automatic enrollment, which is mainly missing in defined contribution plans. We conclude that both these pension plans have their own set of advantages and drawbacks. However, these plans have actually absolutely offered much support to staff members of various sectors economically.


Entrepreneur – What’s Required

March 28, 2014 by Rebecca | No Comments | Filed in Business

In the field of business, individuals associated with the playoffs are called the entrepreneurs. They are also described as businessmen. They have and run their own businesses. In the strictest sense, the definition of what a real entrepreneur differs.

The only certain thing is that, entrepreneurs are quite involved in today’s American business arena. Tracing history back, it is stated that the term entrepreneur has been conceivably acknowledged as a determined part of the economic world just in the mid 1970s. The concept then begins to develop with different significances relying on the understanding of the society that offers definition to it.

Continuing The Conversation

When an entrepreneur is not an entrepreneur. When they are not generating large amounts of wealth! This could be somewhat tough on effort small business owners who are often called entrepreneurs, however it could be suggested that lifestyle business do not truly categorize as business. I think the reason for making the distinction is to actually empower the word entrepreneur, give it some meaning, some gravitas. Not everyone can be an entrepreneur, not everybody wishes to be an entrepreneur, but exactly how do you understand you are one? Well an entrepreneur creates huge value.

In an online dictionary as defined by the Webster’s Revised Unabridged Dictionary, in the year 1913, entrepreneur has been specified as the person who makes some products for his own benefit or account. This offers about the idea that the term has effectively progressed method back in the year 1913. Now such definition could rather be blurry.

Exactly how can a person be called an entrepreneur when he does nothing with that product aside from producing it? What term will be identified to a person who takes other individuals’s products and make a success out of them? Will they be not branded as entrepreneurs too? According to Merriam-Webster dictionary, an entrepreneur is someone who arranges, who manages, and who assumes the dangers positioned by the company or enterprise world. Now this definition of an entrepreneur is richer in material compared with the first one. Risks-these are actually faced by entrepreneurs as they position with any sort of investment in the market.

In a much formal definition of Ashoka, an entrepreneur goes to describe an organizational society that advertises absolutely nothing but social change. Social entrepreneurs are those individuals who open some significant and brand-new possibilities in the areas of wellness, education, environment, and all other areas of the human requirements.

To drive a stricter point, business entrepreneurs are those who lead the technologies worldwide of commerce while the social entrepreneurs are those who drive social change in the society. In more ways than one, such definition all the more mention that those business entrepreneurs not only start with any kind of company but they do promote change within business variety.

Dale Tucker, an individual entrepreneur, goes to define the term as an individual who decides to hold and control of his own future and therefore end up being a self-employed person either by producing his own business or by dealing with a team just like what multi-level marketing suggests. On the other hand, Mark Hendricks suggests that for a single person to be called an entrepreneur, he has to be particularly daring. He should be able to satisfy the challenge of either winning or losing in the business. He therefore should be open to the possibilities of the results of the competition.

Anybody who finances a company venture and runs it can be called an entrepreneur. According to some economists, an entrepreneur is someone who develops a new and fresh item, a brand-new means of producing something, or an innovative market. Usually, entrepreneurs begin with a small company and if it proves to be effective, business will slowly expand.

Why put up little companies? You see, small companies need smaller quantity of capital while larger ones demand huge capital. Very few entrepreneurs nowadays are willing to take the danger of installing big businesses without appropriate study and studies.

Planning and organization. These consist of the setting up and the attainment of certain goals, certification to become part of a dedication, and afterwards being able to keep up with work schedules.

The capability to deal with money. Spending plan needs to be carefully determined, loans have to be secured, funds should be raised, and all of the financial resources need to be taped. For all these things, an entrepreneur should be a specialist.

The selling of concepts and products. An entrepreneur ought to be acquainted with the correct means of selling. On the planet of company, the products whether they take the form of concepts or materials need to offer out in order to gain revenue.

The ability to deal with people. A great connection is constantly required in an entrepreneur. Then he will not likely prosper, if he is not able to influence people.

The capability to be a risk-taker. In the world of business, wins are not constantly safeguarded. There are just two possibilities: losing and winning. Whichever stage faces him, a good entrepreneur understands the best ways to manage it.


The Secret Of Globalization

March 21, 2014 by Rebecca | No Comments | Filed in Business

In the year 2005 for instance, China purchased U.S. bonds with the cash obtained from trade and as a direct result, the interest rate in the United States was reduced and for that reason people who previously couldn’t have, we’re able to secure loans for homes and cars. This meaning of globalization makes it clear that the world is in a sense smaller sized because although the range between countries might never have changed, we are more closely linked than before in a financial way. The second definition addresses globalization in regards to a total activity toward a world economy. This movement focuses on getting rid of specific economies and signing up with countries together more as a way to acquire freer enterprises and markets along with more flexibility in terms of the transport of both people as goods (Arnold, 2008).

Globalization is quite a questionable issue in today’s society. The current push toward globalization has actually been a result of various things such as the end of the Cold War, policy changes, and technological improvements. While globalization might appear to be a straightforward benefit to society, it does not exist without a number of costs. Many individuals believe that the benefits of globalization clearly outweigh the costs; nonetheless, other people hold an extremely different belief and feel that the costs of globalization to our society alone are much greater than any possible benefits (World Health Organization, 2008).

Please read the following

Among the most obvious benefits to globalization is the increase of trade possibilities. To acknowledge that globalization is taking place is simply to say that more people all over the world are trading with each other throughout tremendous distances as compared to years past. The kind of trading that is taking place as a result exists in various forms. Some people are trading the usual money for goods while others are trading money for labor services. Broadening trade, which is ultimately what globalization is formed upon, merely extends benefits of trade between people who otherwise would have never been trading with one another (Intriligator, 2002).

Globalization: More News

With an increase in trade likewise comes an increase amongst income per individual in various countries such as India and China, which have seen dramatic changes in income rates since trade has actually been broadening. China has probably benefited from globalization more than any other country. Millions of people have actually been raised from poverty since of recent changes in trade due to globalization. India has actually been following in the steps of China and has likewise been experiencing obvious changes amongst their impoverished population. Economists who support the presence of globalization also say that enhancing trade with other countries straight affects rates of various goods and therefore is helping the United States’ economy. With an expansion of trade also comes further global competition, which then forces increases among performance along with development (Intriligator, 2002).

While supporters of globalization make legitimate points toward their claim of benefits, those who oppose globalization have an exceptionally strong argument as well. Critics of globalization have been saying that globalization costs far surpass the benefits of preserving that it will cause a radical increase of income inequality within our nation where the income gap is currently rather huge. This income inequality is not simply occurring in the United States, but all over the world and is in turn, ending up being a major problem. Income inequality has currently been on the rise since trade has been broadened. During the present time, the richest countries have almost 75 times even more income than the bad countries, which is a radical increase compared with 100 years earlier when the richest countries only had income that was 10 times as much as in the poorest nations (Arnold, 2008). Since the stable increase of globalization, sixty countries have actually ended up being even more impoverished than in the past. According to a Global Report on Human Settlements in 2001: ‘Homeless people are residing in cardboard boxes on sidewalks of beaming corporate skyscrapers, whose budget plans exceed those of lots of countries’ (Shankardass, 2001, para 2).

Based on these facts, it becomes clear that globalization is highly correlated with inequality amongst the socioeconomic courses. Nonetheless, it is still controversial whether or not globalization really triggered such inequality regarding income. According to advocates of globalization, it is not globalization that is triggering the trouble, but it relates to the fact that some countries are on the fast track to globalization while other countries are taking their time or are not making an attempt to globalize which as a result is causing an even larger space. Nevertheless, lots of countries actually work versus the globalization of poor nations when it pertains to importing and exporting goods (Birdsall, 2007).

Globalization and management throughout borders have had a heavy impact on Global Crossing. This company has actually been positively influenced by globalization in several methods. Globalization has triggered this organization to be able to expand their customer base worldwide. It has actually likewise caused this company to create relationships with lots of other countries (Global Crossing, 2010). Globalization has led to numerous staff members being transferred or employed in other countries. Global Crossing has many places in Europe, Asia, North America, the United Kingdom, and Latin America (Global Crossing, 2010).

Globalization has played a crucial function in the success of this organization. Worldwide Crossing has used globalization in order to increase ‘the company’s goal of taking full advantage of chances’ and produce an outsourcing program to make this possible (Global Crossing, 2010, Para. 3). Globalization supplies numerous business with competitors, but Global Crossing has roots in numerous countries. The strategic value of this company is increased by its relationships with lots of countries (Bateman & & Snell, 2009). This organization has been on the forefront of globalization for many years, and it uses this new environment successfully and beneficially.

Organizational culture is a reflection of the shared objectives, values, and beliefs of an organization (Bateman & & Snell, 2009). Leaders and managers play a role and are responsible for producing and keeping a healthy organizational culture. Development, values, and client service are held highly at Global Crossing (Global Crossing, 2010). Managers and leaders advertise these cultural values throughout this organization by continuous reinforcement and producing individual examples. The members of the leadership team at Global Crossing are very active in development, values, and customer service, and they have actually been working in this field for many years (Global Crossing, 2010). It is important for managers and leaders to create and keep a healthy organizational culture through personal actions.

Organizational supervisors and leaders can produce and preserve a healthy organizational culture through using communication. Managers and leaders must interact with workers regularly in order to advertise a healthy organizational culture. Managers and leaders who connect with employees can enhance and expand enthusiasm to the culture of an organization (Bateman & & Snell, 2009). Communication is vital to maintaining and producing a healthy organizational culture because it permits staff members to interact and go over in order to understand and become involved in the values and beliefs of an organization.

Discussion of values and vision of a company is another way supervisors can develop and preserve a healthy cultural environment. Cultural values and beliefs of a company must exist in relation to goals routinely to motivate interest and participation in a company’s culture (Bateman & & Snell, 2009). In order to make sure that values exist leaders and supervisors need to relate objectives to the vision held by the company. It is essential to encourage employees to pursue an objective that benefits the vision of a company, and this will create and keep a healthy organizational culture.

Setting an example is another way managers and leaders can create and keep a healthy cultural environment. If a manager or leader stands up for and displays the values of a company this will show through to workers. A supervisor or leader who sets an example of honesty that follows the vision of the company is more likely to influence workers to act in a comparable manner. If a supervisor or leader wants to obtain the trust and commitment of an employee the supervisor or leaders need to lead by example. A manager who wants to advertise an organizational culture should represent the values and vision of the company by personifying these values.

Praise and rewards are also a way to create and keep a healthy cultural environment in a company. If workers who display the values of an organization are applauded and benefit others will follow (Bateman & & Snell, 2009). Global Crossing offers their workers with a number of forms of incentives and benefits (Global Crossing, 2010). This positive reinforcement shows staff members that you share the exact same values of the company (Bateman & & Snell, 2009). Incentives are a great way of motivating the values and beliefs of a company due to the fact that it will provide staff members an opportunity to benefit and recognition. This approach is helpful and effective because it motivates workers to work for the benefit of a company and themselves.

Management and management are not always the exact same, however the current business climate requires management to supply management (Bateman & & Snell, 2009). Globalization causes, organizations to require development, and this needs leadership. Global crossing has had the ability to incorporate leadership with managed to end up being a leader in the international company market. This organization offers strong support of organizational culture among employees. The utilization of rewards, setting an example, and reinforcement of vision is all useful ways to motivate a healthy organizational culture. Global Crossing is successful due to the fact that of their combination of management and management, international relationships, and the shared values of their workers.

Among the greatest problems with globalization that is having a direct impact on American society is that numerous Americans are losing their jobs to people in other countries. This is a significant concern for society. For example, 800 American engineers lost their jobs at a New York securities firm and were then replaced with a group of 800 workers in India. These New York engineers were making about $150,000 per year but were replaced by the company due to the fact that the workers from India only needed to be paid $20,000 per year, which therefore conserved the company a significant amount of money, but led to 800 Americans losing their jobs (Arnold, 2008). According to reports, almost 55,000 American jobs will be moving overseas which will have shocking impacts on the communities around these companies and specifically to the thousands of Americans who will then be out of a task. Another issue with globalization is that it puts even more power in the hands of huge corporations in affluent countries and subsequently removes power from those smaller sized corporations who had formerly been effective and effective (Thompson, 2006).

Even though many economists see the benefits outweighing the costs, there are always people who will disagree. Which sides of the argument people take completely depends on their current scenario and what directly influences their life. For example, those 800 people who lost their jobs at a firm in New York would be more likely to oppose globalization since they sustained direct costs, which impacted their family and their way of living up until those people had the ability to discover another task. The company now does not have to invest as much for workers and will for that reason be able to produce more goods at a more budget-friendly price for consumers. While 800 people suffered one of the costs of globalization in this certain case, the companies itself along with its customers were able to directly experience the benefits of globalization. It is far more challenging to recognize the benefits of globalization, however, since they are distributed on such a large scale all around the world (Arnold, 2008).

Globalization will continue to be a discussion between those who directly experience the widespread benefits and those who cannot see past the costs because it straight impacts their lives in an adverse way. As time goes on, perhaps even more people will become open to the benefits of globalization, or even more people will see the obvious problems that stem from globalization and will for that reason oppose it. Exactly what happens in terms of globalization will continue to be a waiting game for members of society in concerns to whether the benefits genuinely outweigh the costs. The best challenge of globalization will be whether or not all of the world’s nations want to cooperate in an effort to be united as one. This single difficulty, nonetheless, might cause the world, even more problems than any person is willing to confess. Ideally, all of the nations will sign up with as one in the hopes of getting an around the world economy in which the benefits are improved while the costs are decreased. Only time will mention to if an around the world economy is truly the finest choice for our future (Intriligator, 2002).


Theory Of The Firm – Profiled

March 18, 2014 by Rebecca | No Comments | Filed in Business

As our global markets end up being more integrated and whole, the patterns of trade have moved. International trade theory is actually nothing new, however, comprehend the patterns of trade in the world today it is essential to understand where these concepts came from. Likewise, as the global market emerges, numerous of these concepts have become outdated; nonetheless, the core ideas of Smith’s outright advantage, Ricardo’s comparative advantage, opportunity expenses and performance, the Heckscher Olin theory of factor endowments, the product life-cycle theory all sets the foundation for a more modern-day approach in discussing the patterns of trade. In more current times, Paul Krugman’s New Trade Theory (even he will tell you, however, he doesn’t agree with some of the points that won him the Noble Peace Prize), talks about economies of scale and market size. Michael Porter took international trade theory a step further and introduced the national competitive advantage theory, otherwise known as the diamond theory, which considers factor endowments, domestic demand conditions, relating and supporting industries and firm strategy, structure and rivalry all affect the favorable sum game of trading. Hence, understanding these concepts can help a firm’s manager know where to base their location of the different parts of their products, acquires a very first mover advantage as well as assist dictate government policy to help stimulate international trade.

While Mr. Ricardo maintains that comparative advantage stems from efficiency, Eli Heckscher and Bertil Ohlin thought that comparative advantages are a product of factor endowments, or the quantity of resources in regards to land, labor and capital a particular country needs to deal with. This has mainly been called the Heckscher Ohlin theory, which forecasts that the regional resources of a nation can be a top overview of what a country will export and what a country will import based upon the factor endowments available.

You must admit it makes sense…

The Comparative advantage which was discovered by David Ricardo in 1817 programs that if a Country has an Absolute advantage over several products it must still concentrate on the most effective products and import the products that they have a less outright advantage over. By following this theory a country can again gain economies of scale to produce the one product in contrast to producing many products and not gaining the advantage.

Additional Information on Theory Of The Firm

The Heckscher-Ohlin Theory discovers the resources that a country has readily available to use to gain an advantage, for instance a country that is rich in coal like Australia must make use of this abundance of coal and get an absolute advantage.

The New Trade Theory, zeroes in on exactly how economies of scale have important implications for international trade. An economy of scale, or scalability, describes the system cost reduction associated with a big scale output. Economies of scale can develop a variety of products and lower expenses for the average customer. When you buy one coke from your corner store the average price is one dollar, nevertheless if you bought several cans from your grocery store, the average price of the chain would go down, even further if you bought your coke in bulk from somewhere like Costco or Sam’s Club, then the price would go down significantly than if you were to buy just one coke from your corner store. This is likewise realistic for companies, and is a significant source of cost reduction. On another note, economies of scale produce greater product variety. When a country concentrates on producing one product, and imports the products they do not specialize in from other nations, it produces a higher variety for consumers across nations. Note that, although globalization has decreased the variety of products being made, it still has actually developed even more variety per nation. As an example, folks in India can enjoy Burger King’s most current Whopper, while those people in the United States can take pleasure in the chicken tike masala; this makes the world’s products seem more and more comparable. The new trade theory recommends that companies that obtain a very first mover advantage, or those companies that are the first participants in an industry, will prevail in the world market, particularly when the market is not big enough to sustain even more than a couple of companies. Governments can assist companies receive first mover advantages by supporting particular industries through subsidies and other ways. In general, factor endowments and the level to which a country has actually the most updated technology, really take the backseat according to Krugman.

A firm’s home country and consumers are the driving force for calculating demand conditions. ‘It starts in your home,” is a top starting point for comprehending this attribute of Porter’s Diamond. This attribute will inform a firm if they ought to enter a market and if that industry is one that is profitable. Customers mention to firms exactly what they desire. And consumers, although products are becoming more global, still have different preferences across nations. These preferences, hence, mention to a company what products are desirable, and in turn tells the nation as a whole what they should focus on. The Computer software industry (silicon valley) is largely based in the United States due to the fact that the demand started here among other elements. As the textbook states, ‘firms obtain a competitive advantage if their domestic customers are sophisticated and requiring,” suggesting the more intelligent the society is as a whole will press firms to produce better quality products.

Another attribute that can give a country national competitiveness is the related and supporting industries around a firm’s market. In other words, to what extent do a country’s firms have other industries that are associated with their own? The even more associated industries, the better of the firm might be in operating in that area, since there are more resources and ‘understand how” that can spill out from one part of the industry to the next. Even if companies are competing, they are pressing each other to produce better quality products and at the most affordable price. Consider Silicon Valley, the name had not been just slapped on the computer industry for no factor; it’s since the software industry is focused into a gigantic cluster, and each company feeds off of the other. This has actually enabled the United States to have the best position in regards to the computer software industry. This is not to tell us the engineers of India won’t one day apprehended up, however, it will not be as a piece of cake for them to enter this industry as it was for those firms in the US.

Lastly a firm’s strategy, structure and rivalry can affect their international competitiveness. As one may guess, this is the next base upon the diamond. A firm’s strategy and structure are connected by the different management ideology in that particular nation. Firms in the US normally think short term, while firms in places such as Switzerland think long term when it concerns their financial investments. Or think about Japan’s hierarchical structure against Italy’s more firmly run companies that look like more of an extended family. Such means of thinking impact firm strategy and structure. The more competitive a market is in one’s home country, the less competition the company will face around the globe. Competition pushes firms to create better and more ingenious products, therefore the better informed and more advanced a country is in a particular sector, the better off they will be in the global market. In other words, the even more effective a company is at home so long as they have a high degree of competition, the more lucrative they will be in the global marketplace.


Pension Clarified

March 9, 2014 by Rebecca | No Comments | Filed in Business

Pension scheme was started and presented informally and enacted laws to the veterans of the advanced wars. This ended up being popular in late 1900 and in 1920, federal civilian pensions were provided under the Civil Service Retirement System. For the benefit and survival of disabled persons, they were consisted of in this pension scheme. However, pension schemes ended up being more popular in the United States throughout World War II.

In some companies, you will discover that employers do contribute to your pension scheme, whether it is an individual pension or stakeholder pension, together with occupational schemes. If they would contribute to your pension scheme prior to you, think of taking a individual or stakeholder pension scheme or an occupational scheme, it is better to ask your employer.

There are different pension schemes available. Some offer greater returns while others offer better security. Keep in mind, schemes that provide high returns likewise have actually high threats associated with it and need more investment in comparison to other pension schemes. Consider all the available alternatives prior to making a decision.

Typically, you might discover another scheme paying greater returns in contrast to your existing pension scheme. Ask the pension service provider what additional charges you should pay to move from your existing pension to a new scheme.


Payment for the majority of the personal pension schemes can be paid in routine monthly installments, quarterly installations or over a fixed time period. While some individual pension service providers enable you to regulate the amount of payments you pay them, others could let you alter the amount of payments without charging additional. People who commonly alter the amount of payments have to be mindful as you might have to pay an additional charge to your pension company. Such charges are called as concealed charges and your individual pension supplier may hide the fact.

While you can pay a repaired amount over an amount of time, you also have the alternative to pay in a lump sum. This can be performed in a single payment or a series of payments that result in lower charges in comparison to installations. A single amount is seldom paid by the people so only a few companies could offer such an alternative. You get tax relief on your pension payments, however up to a limit set by the law. People not working could likewise select stakeholder or personal pension schemes.

The employer and the employee contribute some amount of money to a retirement fund which is then supplied to the employee at the time of retirement. This policy was presented for the survival and benefit of the older people who have actually completed their work life.

Disabled people are entitled to this sort of pension, and they have the option to obtain the funds before the retirement period.

Ladies who have lost their partner in some kind of mishap or disease are entitled to this sort of pension for their survival and to support their children and/or life.

A regular monthly financial investment is required in a defined benefit plan, and it also enables the early retirement option. Opting for early retirement lowers the overall amount of money as the retiree will get the amount for a longer time frame. This plan motivates employees to retire early so that the business can employ young employees at lower wage rates.

In an unfunded plan the amount of benefits is provided by the employer or the pension sponsors and no extra possession is provided. In most of the nation like Germany, Austria, USA, and Sweden this strategy is followed. This is similar to “” pay-as-you-go”".

In a funded plan, sponsors and employer contribute their money. You can’t approximate the amount of contributions made by the employer as you are not familiar with the future returns on your investments, and the future benefits to be paid. The investment reward and financial investment risk are assumed by the sponsor and not by the retiree. In nations like USA, UK, and Austria this plan is made use of and tax rewards likewise add to the funded strategy.

In a defined contribution plan, employee makes the financial investment and in return gets the investment in addition to interest. The contribution of the employee and the added interest will attract the retiree to this plan. This is the reason for the decrease in varieties of people opting for a defined benefit plan. The cash invested can either be from employee wage or from employer/organizational contributions.

In this plan, the financial investment threat and investment rewards are presumed by the employee/retiree not by the employer or by the sponsor. The interest is likewise added to the amount so real benefit can not be pre-calculated. Employee understands about its investment, however, not the genuine benefits. Retiree has all the control over the investment while the sponsor regulates the option of financial investment alternatives and management companies.

A hybrid plan is a mix of defined benefit and defined contribution strategy. A money balance is a defined balance strategy with the assistance of getting in touch with the defined contribution plans.

The balance is the amount equal to the contribution of some portion of the income and the added interest paid on that amount i.e. the interest credit.


Robot: Not Black And White

March 4, 2014 by Rebecca | No Comments | Filed in Technology

From the robot maid Rosie in The Jetsons, to the famous droids of Star Wars R2-D2 and C-3PO, to Arnold Schwarzenegger in the function of a cyborg in The Terminator, to Robocop, I, Robot, The Matrix, Robots… Human beings have long been fascinated with the notion of robots, a term that can broadly be described as an artificial human being. While in the past humans only fantasized about them, today, many types of robots are a reality. For example, there are industrial robots, toy robots, robots that help in space exploration, robots used in the medical field, robots used in agriculture, to increasingly humanoid robots being created for the service sector, whether helping with the chores in the family or as caregivers for the elderly and the disabled.

Given below are a number of the types of robots that have been conceived by humans, many of whom are already in active use.

Robots today are being utilized in a variety of industrial applications. Any job that involves repetitiveness, accuracy, endurance, dependability, and speed can be achieved much better by robots; which is why many industrial jobs that used to be made by humans are increasingly carried out by robots. For example, for the past 30 years or so robots have increasingly taken over the fully automated production model of the automobile industry, wherein a chassis of a vehicle is transported along a conveyor belt and is welded, affixed, painted, and assembled by a sequence of robot stations. Some of the other industrial jobs robots are performing are palletizing and packaging goods, dispensing jobs, robots, and laboratory applications that pick miniscule electronic components from trays or strips and accurately place them on printed circuit boards in the electronics industry.

The Whole Robot Enchilada

Also known as Automated Guided Vehicles, or AGVs, mobile robots are used for transporting material over large building complexes, such as hospital grounds, warehouses, and container ports, using wires or markers located in the floor, or lasers, or vision, to sense the environment they operate in. An advanced form of the AGV is the SGV, or the Self Guided Vehicle, like PatrolBot Gofer, Tug, and Speci-Minder. This can be taught to autonomously navigate within a space, or do it by being given a plan of the area. These robots have the ability of performing tasks that are non-serial and non-repetitive in environment that are complex, hence are defined as intelligent robots.

Although the idea of robots planting seeds, plowing fields, and gathering the harvest may seem straight out of a futuristic science fiction book, nevertheless there are a number of robots in the experimental stages of being used for agricultural purposes, such as robots that can pick apples, prune grapevines, transplant seedlings, and so on. In fact, there already is a kind of robot that shears sheep in Australia.

Random Mind Blab About Robot

Conceptually, these robot design kits are first cousins to the robotics work carried out by major companies today for example by Honda, whose robots can perform some incredibly human actions. Modern robotics is entering an extraordinarily exciting field now, in which robot hands (for example) can be powered by direct brain impulsesfor a human user in another country. The same sort of behaviour, though clearly on a much smaller scale, can be promoted in amateur robots using the right robot kits and a little bit of ingenuity.

For instance, using a sensor glove similar to the type sold for use with some modern gaming stations, it is theoretically possible to create a robot that is fed by the user using motions of his or her hand. So you could, then, build a robot hand that mimicked your exact hand movements enabling you to pick up objects inside tanks or in other locations where you cannot go yourself.

These robots are employed in places that are hazardous to humans, or are inaccessible or far away. A human operator located at a distance from a telerobot controls its action. This was accomplished with the branch of the space shuttle. Some other examples of telerobots are laparoscopic surgery being carried out with the help of a telerobot, or doctors using remotely located robots to communicate with their patients. This enables them to treat patients anywhere in the world. This has the full potential of patients in remote places of the world, without adequate medical facilities, being able to consult doctors across the world, or even in the following town, and the doctors in turn having the ability to monitor them. Telerobots are likewise useful in nuclear power stations where they, instead of humans, can handle hazardous material or undertake operations potentially harmful for humans.

Telerobots are particularly useful for space exploration. Some of the applications in space that are on anvil are robots used for the operation of satellites, robotic arms for manufacturing in space, robots used for constructing space ships and space stations, and so on.

Robot Arms: They help in the performance of the repair and assembly tasks on International Space Station and Space Shuttle that couldn’t be met by a human. Canadarm is the most notable among them.

Telerobots are also being increasingly used for military purposes, for instance the Unmanned Aerial Vehicle used for surveillance and also fire at targets. Some of them have even advanced to the degree of having the ability to automatically make decisions like choosing the location to fly to, and deciding which enemy target to engage with. Many telerobots are being used by the US military in Afghanistan and Iraq to diffuse IEDs, or Improvised Explosive Devices. An Unmanned Ground Vehicle, or UGV, is on the anvil which can carry out military missions independently.

The Japanese are in the first line in these types of robots. Essentially, this category comprises any robot that is used outside an industrial facility, although they can be sub-divided into two main types of robots: one, robots used for professional jobs, and the second, robots used for personal use. Amongst the former type are the above mentioned robots used for military use, then there are robots that are used for underwater jobs, or robots used for cleaning hazardous waste, and the like.

Personal use robots are becoming ever more popular, with increased sophistication in Artificial Intelligence and with them becoming increasingly affordable, and are being seen in areas such as caregiving, pet robots, entertainment, and house cleaning. Although it is more costly and difficult to make highly intelligent and sensitive machines, but service robots designed with minimal intelligence are already fairly common, such as the vacuum cleaning robots.

The creation of the amazing walking humanoid named Asimo gave the impetus for several others, such as the house-helping robot named Wakamaru, and Aibo, the robot dog. Then there are the popular robocon competitions held in Japan, with robots playing soccer or having fighting matches.

Another area where personal use robots are being introduced is under the care for the elderly. In countries where there are growing numbers of the aged with comparatively fewer numbers of young people to provide them with care, due to low birth rate and increased longevity, such as is true in Japan and a growing number of Western countries, robots are increasingly thought to become the answer. These robots are being designed to provide physical services such as carrying bedridden elderly people (or even the handicapped), or washing for them, and doing various other day-to-day tasks. And then there are robots being designed to provide mental services, such as offering the therapeutic effect of interacting with the often lonely elderly people.

Humanoids are a big help to the corporation and for those people who can only afford it. They help people in any kinds of situation. In Japan, robots are very useful, but there’s a possibility that might loose the job of a hundred people. Most people don’t agree that robots are better than human. They still prefer people that created by God and not a robot created by human. They believe that if they would all relying on robots, it might end the human civilization.

Humanoids that aren’t perfect as human, serve also as entertainment purposes. Some people treat humanoids like a real human which most of the people thought that it was ridiculous. Male bought female humanoids and think of it as their partner, fellowship, or wife to make them satisfied. To have an ideal partner, they tend to buy humanoids even it’s worth a million dollars. It is like humanoids in anime where a son and a girl fall in love and humanoids turn into a genuine human. It is a need to those people who’re not satisfied.

Japan created humanoids first in anime to portray of what’ll happen to the future. They see it in anime as a big necessity in the human society. Most people in Japan invented this machine to make it as a reality from humanoids that are seen on animation. Those humanoids that are established by human aren’t perfect as what people expected in animation. They may have advantages and disadvantages. However, we’re in the modern technology this coming year, man that created robot will never be as perfect as what God has created to each all of us.

Hence, the trend is towards developing more and more sophisticated humanoid types of robots, with human-like physical features and intellectual abilities.


Open Source Software – A Closer Look

February 24, 2014 by Rebecca | No Comments | Filed in Technology

Today most businesses do not have to worry about what vendor to purchase their hardware from since it’s all pretty much universal. Instead, they have to worry about which software they’ll use to implement the business on that hardware. There are numerous choices, from pre-packaged off-the-shelf solutions, in-house designed and developed solutions, custom contracted designs, etc. Then there’s open source – a relative newcomer to most businesses, but in particular, one that is developing in acceptance at companies around the world.

So what exactly is open source? Generally speaking, it is software that is provided under an open license – you get the source code and then you’re free to do with it what you wish. You can run it as-is, customize it or use it as an integral part of another package. Businesses have warmed up to open source computing in recent years since it allows them to become more agile in choosing solutions and software that fit their business needs. They are no longer locked into one particular vendor, or locked out of software altogether, because the price tag is too high. It allows them to put a large part of their in-house programming and IT talent to work designing the specific software that holds the business rules for the business instead of redesigning common applications – like accounting packages, web servers, etc.

There’s Always More About Open Source Software…

Of course, as the expression goes, there is no such thing as a free lunch. Free comes with drawbacks – the one of the major drawbacks for any business looking to go the open source route, is the subject of support for the system they’re running. Just imagine a business using an open source accounting package and it fails – without support the level of time and potential lost revenue the business would suffer could be enormous. It is because of this that many companies, when looking at the open source route, do so not with the free price tag in mind, but instead they think about value-added support services offered by third-party companies.


While the software may be free, many companies pay for these support contracts to ensure that when things go wrong there is someone on the other side of the phone to assist them. A number of vendors have turned to this model, taking open source software such as the Linux OS, and packaging it with support services and offering that to customers. In fact, this trend of bundling open source software with support and implementation services has become so popular, that many commercial vendors that may already provide us with products such as HP servers, software, and Sun servers, have started looking at offering similar programs or revamping their product lines to take advantage of open source developments.

Other Important Open Source Software Considerations

Open source software is generally free. So is the virtual world of support through the community forums regarding software. Live assist such as forums and chat often comes with nearly every Linux software package. There are options to obtain added support with open source software. However, it is always going to be much less expensive than investing on the essential commercial software alternative. With open source software, you’ll get superior software at a reduced price than commercial software, in addition to you are not being locked into restrictive software which will continually need improvements and customer back up.

It is a fairly easy decision to go with the possibility that will better go well with your personal as well as business wants by using all of the benefits of open source software over the big brand commercial software. If you ever think it isn’t up to your mark, try some other program. It is possible that you may never need to handle commercial software again. There are lots of options that can answer your needs with open source software.

So is open source right for your business? That all depends on what you’re trying to accomplish. Nothing is ever a perfect fit for every business. Each business must decide what it wishes to spend its limited resources on. However, for most companies, the road to open source computing is looking bright and widening by the day. Proprietary, closed software packages may one day be something we only talk about in the IT history books.


Medical Technology – Reality Check

February 19, 2014 by Rebecca | No Comments | Filed in Technology

Medical technology has grown leaps and bounds especially from the standpoint of producing advanced devices that will help people maintain their good health and save more lives.

Most medical devices are used to help diagnose and treat certain diseases so if it isn’t working as it should, it can pose life-threatening dangers.

Which leads us to….

Medical devices, like any other products, operate on the premise that it will function in the manner in which it is supposed to. Medical products in particular, provide people who use it the guarantee that it’s a safe to use and will adequately address certain health concerns.

More Random Medical Technology Stuff

Medical librarians, medical billers and coders are part of the other jobs that do not require hands-on care. Health insurance companies provide many career opportunities for health care providers including case management, medical reviews and medical authorizations.

The Food and Drug Administration (FDA) is the federal agency tasked to assess the safety and efficacy of medical devices before it is marketed to the public.

Aside from approving new products before it is released, the CDRH also investigates reports of defective medical devices.

If a medical device is found to hold a safety defect, the CDRH can recommend a product recall to the manufacturers.

Medical device manufacturers usually comply by doing a voluntary product recall to avoid possible lawsuits and further damage to their image.

Two medical device manufacturers have been getting a great deal of attention as a result of allegations about some possible defective products.

Some patients were experiencing sudden shocks after being implanted with the device according to reports.

Two more companies, Centurion Premie and Meconium Packs also issued product recalls for their pediatric tracheal tubes.

Investigations found out that the tubes manufactured have a smaller internal diameter than what was listed on the label.

It sounds like a small thing. However, a few millimeters can tell the difference between life and death to some patients.

If you’re currently using any medical device, you should keep yourself informed about the latest product recalls announced by the FDA.

You should also be mindful of all the possible consequences of the medical device to your body, whether it is the primary function of the device or just a side effect.

The manufacturer or vendor of the medical device should make a full disclosure about all the important information regarding the product including proper use, warranties, and possible harmful effects.

If not, you may find yourself surprised and shocked that the instrument that is meant to help you is harming you.


Practical Human Resources

February 12, 2014 by Rebecca | No Comments | Filed in Business

A company’s human resource department says a great deal about how a business is managed. If employees feel as though your human resource department is in complete chaos, they’ll feel less secure. This can even affect productivity. One of the best ways to make sure this vital area of your company runs effectively is through straightforward and thorough workplace policies and procedures. If you do not have these in place, then you could end up with quite a mess in your human resource department. There are several tools available that can contribute to, such as human resource management services. Many of these services are available online through one of several companies that specialize in this industry.

Workplace policies and procedures are among the most important manuals you can provide your employees. It outlines what is required from your employees, grievance procedures, employment laws, and likewise what your employees can expect from your company. Most companies only update these manuals when absolutely necessary, as when a problem arises that you wish to prevent in the future. Human resource management services can help you develop these policies so that you will be able to protect both your company and your workers.

Going Forward: Human Resources

When rules, standards, and regulations are laid out plainly in black and white, it’s not easy to get around any consequences that might arise if these stipulations aren’t followed. However, your company is as responsible for following those workplace policies and procedures. If you try to circumvent or get around these policies, you’d be opening yourself up for fines and other penalties on the part of the government or a case in civil court from your employees. One of the best ways to work around this is to keep a human resource management services company. They can give you all the tools you require to have an efficient and efficient human resource department.

Please read on…

The hiring and firing of employees can quickly cause many headaches, especially if your business has many employees or a high turnover. There are requirements for paperwork for payroll, training, and in some instances, background checks. If you can figure out a way to streamline these processes, your company will operate more efficiently. From employment testing to interviews to the final hiring decision, human resource departments are often overworked and understaffed. You can turn over as many of the process as you’d like and still have the final decision when it is a question of who works for your company with the right human resource management services company.

This Could Lead To Other Ideas

Human resources now involves a great deal of planning and management of the employees of the company. The aim of the HR department is to foster loyalty amongst staff and help them realize and realize their full potential. If your company has a happy and fulfilled workforce then your company will do well. There can be little doubt that the employees of a society are one of the greatest assets it has. Human resources work is intended to improve that asset and make it stronger. The company as a whole will enjoy a more productive and creative workforce.

Workplace policies and procedures should also specify how employee records are kept. It’s your responsibility to make sure it is kept secure with all of the personal information that is available in an employee’s file. It does not matter if this information is kept on paper or digitally, you must make sure it is safe from prying eyes at all times. This is another area where a human resource management services company can assist you.

In closing, there are several ways that a human resource management services company can help your business streamline this important department. From workplace policies and procedures to helping find you the most qualified employees for your company, there is simply no need to look elsewhere.

HR Tools provides you with the widest variety of human resource management services available today. You’ll find all the information you need regarding every aspect of your human resource department, including workplace policies and procedures, software for payroll, and labor laws.


Clarifying Cost Accounting

February 10, 2014 by Rebecca | No Comments | Filed in Business

One of the main aspects of accountancy is that of cost accountancy. The domain of cost accountancy plays a critical role in the internal management of the organization quite in contrast to the other fields of accountancy. It is demanded that the people hired for the position taken by the cost accountants are the people who have the right qualification as well as the right aptitude for the job. Cost accounting is part of the management accounting and thus is exclusively concerned with the internal evaluation of the organization. Cost accountant is responsible for the development of the actual budget and the cost of the various activities of the organization.

A cost accountant is the one who can tell the steps that can result in profits and the steps that can result in losses. If required he can tell when and where the company needs to cut back its costs and where and how it can channelize the funds to obtain the maximum profits. It is the obligation of the cost accountant to make sure that the internal managers in the company receive the right idea of the finances of the company. Almost all the decisions that are made by the management of the company in deciding the future policies and the decisions regarding the further growth of the company is founded on the actual scenario as submitted by the cost accountant in his reports as well as through the presentation to the upper management.

Really, it makes sense.

Cost accounting is one branch of accounting which is used to control and record the transaction costs systematically, and provide cost information in the shape of cost reports to management. Benefit costs provide information sought by management in managing the company, namely for the planning and control income; basic pricing of goods and services.

Are There Any Cost Accounting Secrets?

Cost objective is as an element or activity for which cost is accumulated and measured, and some activities or items that can become the subject of cost include batch of similar units, products, and product lines (strategic objective).

Considering the nature of the position of a cost accountant, it is a need for the person who is hired as the cost accountant is the one with a great deal of integrity, honesty as well as commitment towards his work. A graduation degree in accounting along with some years of the experience gained in the same field can get one began in the field of cost accounting. A higher qualification like the CPA or a CA can only go a great deal in furthering the career in the field of cost accounting.


Organizational Structure

February 6, 2014 by Rebecca | No Comments | Filed in Business

Before we discuss the differences in organizational structure, we need understand the sense and purpose of organizational structure. Organizational structure formally determines the hierarchy within an organization. In other words, who reports to whom? Some companies refer to this as the organizational chart. Types of organizational structure include: functional structure, matrix structure, and divisional structure. Divisional structure is further subdivided into three sub-types: market structure, product structure, and geographic structure.

Product structure groups employees together based upon specific products manufactured by the company. An example of this would provide a company that produces three distinct products, ‘product b’, ‘product a’, and ‘product c’. This company would have a separate division for each product.

It will divide an organization into divisions in charge for different products. As the description suggests, this structure will be utilized by those companies which produce more than one product. For example, a car company would be divided into Small Car Division, SUV Division, Trucks Division, etc.

Market structure groups employees together based upon specific markets in which the corporation sells. When I worked at the ISP, we also used a type of market structure. We sold internet access to individual consumers and business customers. So the sales and customer service departments were organized using market structure. Consumer sales and consumer customer service worked together. Corporate sales and corporate customer service worked together.

Geographic structure groups employees together based upon specific geographic location. This is often used by large companies that operate in a number of areas throughout the United States or in both the U.S. and overseas.

Matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. An example would be a firm that produces two products, ‘product a’ and ‘product b’. Using the matrix structure, this company would organize functions within the company as follows: ‘product a’ sales department, ‘product a’ customer service department, ‘product a’ accounting, ‘product b’ sales department, ‘product b’ customer service department, ‘product b’ accounting department. Matrix structure is the most complicated of the different organizational structures.

Finding the organizational structure that works best for a given company is very important. Using the wrong structure can give rise to poor communication, poor customer service, poor product development, and a host of other business problems. Any of these things can be harmful to a company and could result in lost revenue or even complete inability of the company.


The Brilliance Behind Cost Accounting

January 24, 2014 by Rebecca | No Comments | Filed in Business

In order to preserve the competitive vitality of your small business it is essential that you’re aware of all your costs, that you control them, and that you know as well as they compare with those of competitors who product the same product or provide the same service.

Costs are a measurement of the resources, or input required to produce a product or service and bring it to the customers or clients. It is important to consider all costs, from the creation of a new product or service through the service after the sale. By understanding all the costs, you can set the price you need to charge for the product or service, in order to meet the all your costs and generate a reasonable margin or profit for your company.

Cost Accounting Conundrum

Non-Manufacturing Costs-Period and product costs are the two types of expenditure under this classification. Period costs are those that are measurable through time intervals like rent on a monthly basis. Product costs are those expenses related to the sale of such products.

Costs Related to Function and Control-These are costs that are variable, fixed, direct, indirect, controllable, non-controllable, avoidable, unavoidable, relevant and irrelevant. Variable costs are those that will change in accordance with the level of business activity. Examples are direct materials, direct labor, cost of goods sold, etc. since they tend to fluctuate in relation to the result of the goods, both in the production and sales.

Fixed costs remain constant irrespective of the change in the standard of business operations. Direct costs are those that are specifically identified to every processes, products or departments.  Indirect costs are the opposite, on the other hand. The types of costs that weren’t given some explanations are almost synonymous to their names and self-explanatory. Hence, no further explanations were attempted.

In overall terms, net operating income is calculated as follows: Sales revenues minus the expenses of sales equals gross margin. The gross margin minus selling and administrative expenses equals net operating income.

From operating income you subtract other general expenses that aren’t directly allocable to sales but that still form part of the expenses of running your business. These expenses include interest and bank charges, non, and taxes-operating losses.

Cost of sales consists of all costs that are clearly allocable to the products sold or the services rendered. Some of these expenses are easily identified, such as the price of materials and labor that enter directly into manufacturing a product. Other costs may be harder to allocate directly to a specific product or service. However, it is important to identify them as precisely as possible.

In a merchandising company that buys articles for resale, direct costs include the amount paid for the ware, transportation costs, and the shipping, and storage or storage costs. When you buy and sell more than 1 type of product, it is important to assign the costs that correspond to more than 1 type of product, for example the costs of shipping an order that includes several types of products, and the cost of warehousing various types of products.

In manufacturing companies, direct costs include raw materials, labor, and supplies. What is important is to be in a position to measure the cost and to allocate it to specific products. In this type of business, cost accounting takes on added importance, to be able to calculate a unit cost that can serve to set the proper selling price and calculate the margin earned on each type of product.

In a services business, direct costs are the hours each person spends providing the service, multiplied by the compensation each person receives. It is important to consider all costs, including salaries and wages, benefits, and bonuses and awards when calculating the hourly cost. There could be materials that are employed in providing the service and these also form part of the direct cost. And when the services of contractors or other third parties are used, the amount paid for their services is also contained in the direct cost.

Indirect costs are those that cannot be allocated to a specific product or service but that nevertheless form part of operating costs. These costs can include utilities such as water, electricity, and gas, and insurance. They also include repairs and maintenance of machinery and equipment, and depreciation and amortization.

Indirect costs can be assigned to products and services according to a predetermined method. This may appear on a prorated basis.

In a merchandising company you could divide the purchase cost of the merchandise by the number of items purchased during a month. Then you can allocate part of the indirect costs for the month on a prorated basis to the items sold during the month to calculate the cost of sales. The remaining part of the indirect costs would remain as part of the expenses of inventory, for the items purchased but not sold during the month.

In a manufacturing company, you could allocate the indirect costs that are measured based on the adoption of time, such as rent, the base cost of utilities, insurance, and depreciation, based on the number of products manufactured in the same period, such as a month. These allocated indirect costs would then form part of the expenses of the product. The cost associated with products sold during the month would be booked as cost of sales. The cost associated with products manufactured but not sold during the month would be booked as part of the inventory cost.

In a services business, the total indirect costs incurred in the month could be divided by the total number of hours worked during the month. These costs would then be prorated and allocated to cost of sales based on the percentage of hours worked during the month that can be billed to clients. The portion of indirect costs allocated to hours that cannot be billed would constitute an administrative or general expense.

There are more precise ways to allocate indirect costs. For example, in a manufacturing company where machinery is used to produce a product, if you can calculate how much machine time is needed to produce one unit, or a certain quantity of units, and you can determine all the costs involved in operating the machinery (electricity, fuel, lubricants, repairs, maintenance, depreciation), and water you can calculate an indirect cost per unit. This involves more effort in accounting for the costs, but when these expenses are significant, it may be beneficial and even necessary.

Depreciation is the method used to disseminate the cost of investments in buildings, machinery, equipment, and installations over their useful life. There are specific rules that are relevant for the depreciation that can be requested as a business expense, and therefore a deduction for tax purposes. It could be that the same method used for tax purposes may be used to calculate depreciation expense in your business, for financial accounting purposes. But if you wanna have a more precise identification of the cost that your fixed assets involve, you’ll need to make the most accurate estimate possible of their useful life.

Depreciation is either of the accounting terms that many people find hard to understand and it is easy to understand why. Depreciation is the decline in value of a fixed asset as it is ‘used up’ in the day to day operation of the business. Depreciation is a non-monetary business expense, I.e. there is no cash outflow, although it isn’t a tax allowable deduction. Amortization is like depreciation. As such it’s another one of the accounting terms that many people struggle to get to grips with.

Depreciation deals with the decline in value of a tangible fixed asset, I.e. one that can be observed and touched. On the other hand, amortization deals with the reduction value of an intangible fixed asset, I.e. one that has no physical substance, such as goodwill, patents and licences.

Useful life depends on many factors including whether the asset is purchased new or used, the manufacturer’s indications, the use that is made of the asset, the operators’ know-how, the share of its capacity during which the equipment or machinery is operated, scheduled maintenance, the exposure of the asset to wear factors such as conditions, and the company’s policy with regard to scheduled replacements.

To calculate depreciation you take the invested amount, it’s the initial acquisition cost, and subtract the salvage value. This is the value you plan to recover from the asset when you no longer use it. This gives you the depreciable value. The depreciable value divided by the number of periods during which you expect to utilize the asset (its useful life) provides you with the depreciation charge per period.

In addition to being direct or indirect, costs can also be fixed or variable. Variable costs fluctuate according to the amount produced or the amount of activity, while fixed costs remain constant, regardless of the degree of production or activity. Rent and insurance are fixed costs-they’re the same every month. Raw materials and supplies are generally considered variable costs.

Salaries and wages can be fixed costs and also variable costs. Wages that are paid depending on the amount of work performed, or the number of units produced, are considered variable costs. The salaries of administrative personnel are generally fixed costs. In a manufacturing company, the number of workers may conform to production requirements, and in the present case salaries and wages could serve as a fixed cost in the short run, but variable over the long term.

The depreciation of machinery, equipment, and other installations used in manufacturing can represent a variable cost if depreciation is calculated on the basis of machine hours, for example. The depreciation of other assets, when calculated based on equal periods, would represent a fixed cost.

It is important to consider costs on a total as well as unit basis. A total cost may seem reasonable, and may leave a profit in one month, when a certain number of units are produced. But the same total cost in a month when fewer units are produced may be excessive.

For example, if you had revenues of $50, 000 one month, with a total manufacturing cost of $40, 000, you were left with a gross margin of $10, 000. In that month, you manufactured and sold 100 units at a price of $500 per unit, and a unit cost of $400. The next month, the manufacturing cost stayed the same at $40, 000. But instead of manufacturing 100 units, you only manufactured 50. Now the unit cost is $800 ($40, 000 / 50). If you sell the 50 units during the same price of $500, your total sales revenue would be $25, 000 (50 units x $500), as well as with the total cost of $40, 000 you ‘d have a loss of $15, 000.

This system is oriented to the activities carried out under the company, with the calculation of the value that each activity in each process adds. The activities are the set of elemental jobs and tasks whose realization determines the final products. The basic idea behind this method is that it’s the activities and not the products that generate costs. It is the products that consume the activities. And in this model, the indirect costs of supporting activities take on greater importance.

According to this method: (1) the different supporting activities (indirect expenses) are identified and analyzed. (2) The corresponding costs are allocated to each activity, creating cost groupings. (3) Activity measures are found, that serve as a link between the activities and the corresponding indirect costs. These can be linked to the finished product. These activity measures must be set in activity units that can be clearly identified.

The activity measures, or "cost drivers" could include the number of production orders filled and the number of deliveries made, for example. A higher cost is allocated to those products that have demanded more cost drivers and therefore many of the company’s resources.

The activity based cost method is particularly relevant for an operation in which indirect expenses make up a significant part of the expenses of manufacturing a product. In an operation in which raw materials, labor, and supplies are the most important costs, and indirect expenses make up a less significant component, the traditional method of costing may provide a sufficiently precise cost determination.

But it should be pointed out that the activity based cost system is designed to identify the set of activities whose goal is to create value for the business. It is a system that generates the cost of such products, but is also served to analyze a company’s value chain. The sets of activities that make up the overall productive processes are kept in sequential order to identify the cost that is accumulating in the chain, and the value that is added in each process.

Once all the fees are identified, you can use this information to plan, prognosis, and budget. Information on costs can be used to determine the prices to be required for the products and services your business offers. In a business that operates on the basis of jobs or projects, this information will allow you to quote a price that covers all your costs and leaves you with an adequate profit margin.

You need systems to record your actual costs. With these records you can compare your estimated and budgeted costs to the real costs and perform a variance analysis. You can take the necessary measures in managing your operation based on this.