Hebrew Pentecostals Essay

Hebrew Pentecostals Essay.

The movement known as the Hebrew Pentecostals started in 1914 by Bishop R.A.R. Johnson, a former Methodist minister, in Beaufort South Carolina. Bishop Johnson, dissatisfied with the Methodist church and its lack of positive support for the Pentecostal experience which included tongues, the indwelling of the holy spirit, and the observance of the original seventh day Sabbath, left the Methodist church to form what was called the “ Commandment Keepers”. Through Bishop Johnson’s travelling ministry both nationally and internationally the church experienced rapid growth and quickly developed congregations on three continents.

The group has been in existence and growing ever since then. Bishop Johnson was succeeded by Bishop Aaron Smith, first Chief Apostle, who led the church from 1941 to 1049, followed by Bishop S.P. Rawlings, second Chief Apostle, who headed the church from 1950 to 1990.

Under Bishop S.P. Rawlings the church saw significant changes including the adoption of the Jewish festival days, and the acceptance of an identity as “Hebrew Pentecostal”.

Hebrew Pentecostals do not consider themselves a Christian group or a Jewish group; they associate themselves with both early Christianity and the faith of the early Hebrews. Bishop Rawlings felt that the churches observance of the Jewish law and the acceptance of Jesus Christ as the Messiah separated the organization from traditional Christian and Jewish theological positions. The term “Hebrew Pentecostal” provides a unique identifier which embodies the marriage of Judaism and Christianity. Bishop S.P. Rawlings was succeeded by Bishop F.C. Scott, third Chief Apostle, who led the church from 1991 to 2005. Bishop Scott dedicated the current national Temple and oversaw paying it off. International presence increased greatly under his leadership and technological advancements were made in the church.

Powers of the executive boards were refined and polices were updated. The honorable Bishop James E. Embry is the current Chief Apostle of the church and has been in office since 2005. Hebrew Pentecostalism is a religious philosophy derived from the inclusion of all divine concepts expressed in both the old and new Testaments of the Bible. The writings of the Old and New Testaments form the basis for both Judaism and Christianity, they also sharply delineate respective perceptions regarding the manner in which man is required to recognize and worship God. For example, Judaism rejects the validity and applicability of the New Testament writings while Christianity does the same for much of the Old Testament. It appears therefore that a merging of these two desperate positions would be tantamount to mixing water and oil however, that is exactly what Hebrew Pentecostalism does.

The word “Hebrew” was used in Bible history by foreign peoples as a name for the Israelites; today it is applied only to the Hebrew language. Since the basic tents of the Hebrew Pentecostalism extracts its legitimacy from the original concepts of the Bible, it follows that the original reference to Gods chosen people is retained in the denominational identification. Membership is claimed, in the Hebrew family, by linkage provided by the Apostle Paul in Gal 3:29 And if ye be Christ’s, then are ye Abraham’s seed, and heirs according to the promise. Pentecostalism has its basic roots in familiar religious concepts. Its beginning can be traced to Acts 2:1-6, where the promise of the Holy Ghost was fulfilled in the upper room. The recognition of the indwelling of the Holy Spirit survived through centuries, but grew in the United States when speaking in tongues was evidenced in the southern Appalachians(1896).

However, Bishop S.P. Rawlings of the House of God fathered the concept of “Hebrew Pentecostalism” at the 58th Convocation in 1977, after recognizing the The House of God was the only known church that embraced the total Bible as current day truth. They follow certain commandments in the Old Testament, such as dietary laws, the three pilgrimage festivals and the Sabbath. Their devotional services follow the Hebrew tradition rather than the Christian. They observe the Sabbath, it being an element in Creation since God himself rested on the seventh day and Adam rested with Him. They believe the Sabbath was made for man, but the Jewish people are the carriers of it. By observing the Sabbath, they are following the practices made for man. They have a systematic way of dealing with issues that come up within their organization and there is a definite hierarchy. They have a spiritual leader over the entire movement, called the Chief Apostle.

Currently, the Chief Apostle is Bishop James E. Embry Jr. Under him, there is a board of Apostles, Elders, Pastors, and Evangelists. If there is a decision concerning matters of the Scripture, it comes down from the board of Apostles to the Pastors and to the local congregation. There are the male-only offices: Bishops, Vicar Bishops, Elders, and Deacons. Then the male-female offices: Pastors, Evangelists and Ministers. Then the female-only offices: Elect Lady, Mothers, Missionaries. The role of women is very open in the Hebrew Pentecostal church. There are women Pastors, women who carry out the Sacraments, such as marriage, burying the dead, and rites of Passover. They have no problems with the feminist movement as a whole, but there are some individual disagreements. Basically, as long as the feminist movement does not contradict the word of God, then they accept it. Since the feminist movement advocates abortion it cannot be supported by the church in that area.

Their Sacraments are not similar to the Christian Sacraments. They have incorporated the rites of Passover into them. Passover is not a Sacrament in the Christian tradition. This reflects how they incorporate the Hebrew tradition into the Christian idea. The titles of many aspects of their religion have Christian names and some Hebrew themes although they do not exactly call themselves Christians. One common theme in their beliefs is the desire to go back to the root of the religion, rather than follow what history has made it to be. Hebrew Pentecostals are similar to Messianic Jews. However, Hebrew Pentecostals differ from Messianic Judaism in the respect that they started from different places.

Messianic Judaism came from a Jewish background to accept the concept of Jesus as the son of God, whereas the Hebrew Pentecostal group came from a Christian background to embrace the Old Testament traditions. They are on the same understanding of the scriptures and identify with them closely. The primary doctrine of Hebrew Pentecostals is contained in twenty four principles developed by Bishop R.A.R. Johnson. Although there are other doctrinal issues that fall outside of these principles, “The Twenty Four Principles” represents the foundation of the church doctrine. They are as follows:

It is important to look at how they approach change since much of their tradition is based on keeping things as they were originally. It is very interesting that if Hebrew Pentecostals find there is something the word of God teaches that they have not been aware of they are open to change. The way they approach change is through question that come up in the national meeting. Anyone can write to the board of apostles with questions and their answers are discussed. A doctoral change may or may not come out of it.

Ideas for change can come from the congregation members themselves. The actual mandate of the change is given by the board of Apostles. It seems that the majority of the movement is based on going back to the basics and keeping things the way they were in the beginning and the acceptance of change seems to go against that framework. In the past 40 years Hebrew Pentecostals have increased 1000%. They grow through the merging of churches and through proselytizing. They do not actively proselytize, but when people hear of them, they explain what they are about and people join.


Hebrew Pentecostals Essay

Cap and Trade Policy Paper Essay

Cap and Trade Policy Paper Essay.


The issue of carbon emissions is an important one not only from an environmental perspective but also an economic one. While reducing carbon emissions is an important one for the health of human beings as well as that of the environment, the larger question is what type of policy strategy is best for both reducing such emissions which might have an impact on efforts to mitigate the effects of pollution on climate change.

While ther are options to consider which does not rely on economics– technological or output standards achieved by command and control regulations–they are often fraught with political resistance by industry because they do not allow industry to make any choices or play a role in solving the problem of excessive emissions and the burden that these emissions place on others.

Instead of such draconian measures based on fiat, the preferred options rely on economic tools instead to provide incentives to industry to police itself by either incenting investment in emission-reducing and/or energy saving technologies or to reduce production in line with the total/social-costs rather than just the private/ producer-costs of production.

Two such economic policies to consider in this regard are emission taxes and cap-and-trade policies.

Overview of Policy Problem: Carbon emissions reduction

Consider a company that faces an increasing marginal pollution abatement cost curve as in the Figure 1. Left unregulated it will choose not to reduce its carbon emissions (a.k.a abate carbon emissions) and avert facing the costs of abatement represented by the area underneath the marginal abatement cost curve represented by area (B + C + D) in the diagram below. Figure 1: Marginal Costs and Marginal Benefits of Reducing Carbon Emissions [pic]

Source: Econ 101: Carbon Tax vs. Cap-and-Trade, 2012, n.pag. Suppose that policy analysts have determined that the economically efficient level of pollution abatement occurs at the point where marginal benefits of abatement equal the marginal cost costs of abatement as is suggested in economic theory. The resulting level of carbon emissions is e* (reduction in emissions is measured from the far right in the diagram above to the pointe*). The question is what policy to follow to achieve e*: either some type of fiat policy involving either some type of output restriction or requiring use of a particular pollution-control technology or some type of policy that involves financial incentives to reduce emissions. This paper hypothesizes that policy options involving economic incentives are preferable to those options that involve regulatory fiat.

Specification of Economic Policy Models:
1) A Carbon Emissions Tax:

One policy instrument that can be used to achieve this level of abatement is to set a tax where marginal benefit equals marginal cost — represented by the horizontal “tax” line in the Figure 2 below. Under such a scheme, the polluter will find that it is cheaper to reduce carbon emissions so long as the marginal cost is lower than the tax. Since the tax bill (A + B) is great than the marginal abatement cost bill (B) to the left of the point e*, the firm will choose to reduce emissions up to the level of C with the remaining emissions level indicated in figure 2 measured from the right in the diagram. To the right of e*, the marginal abatement costs, represented by areas C + D, are greater than the tax bill (area D) so the firm will choose to pay the tax and continue to emit pollutants beyond e*. Figure 2: The Carbon Emissions Tax


Source: Econ 101: Carbon Tax vs. Cap-and-Trade, 2012, n.pag. So long as the marginal costs and benefits of abatement can be known with certainty, an emissions tax can be set at the point of intersection of these two measures resulting in an efficient level of pollution emissions at e* with total abatement costs (including taxes paid) to the polluter of area B+D and providing the government with revenues represented by D (Econ. 101: Carbon Tax vs. Cap and Trade, n. pag.). It is when these marginal costs and marginal benefits are either not measurable in their entirety or when there is uncertainty about the figures obtained that leads to added questions as to whether this would be the best policy to follow.

2) A Cap Policy:

An alternative policy to an emissions tax to achieve reductions in emissions through the tools of economics is to set a cap at the point where marginal social benefit equals marginal social cost of reducing emissions/abatement — represented by the vertical “cap” line in Figure 3 below. The polluting firm must reduce its carbon emissions to e* where the marginal social cost of reducing emissions equals the marginal social benefit of the products produced by the polluter.

Such a policy–if the social costs and social benefits can be measured accurately—results in an efficient level of emissions produced/reduced at e* with an abatement cost borne by

Figure 3: Cap Policy for Each Firm

Source: Econ 101: Carbon Tax vs. Cap-and-Trade, 2012, n.pag. the polluter equivalent to area B (Econ. 101: Carbon Tax vs. Cap and Trade, n. pag.). The issue is whether total social costs can be measured and measured accurately in order to set such a policy at the correct or efficient level of emissions for each firm. Normally such policies do not result in efficiency even though an efficient level of overall emissions can be attained since it does not account for different costs of abatement in different firms. That is, a level of emissions can be attained that is equivalent to that achieved under an economically efficient policy but the level is not achieved at the lowest overall cost.

One way of obtaining individual caps is for the government to auction off emission permits that total the pre-set amount of emissions that it feels is optimal. Firms with higher costs of reducing emissions will bid higher than firms with lower cost structures. Again, the only problem is determining what the total amount of emissions should be reflecting all social costs and benefits of reducing carbon emissions.

3) A Cap-and-Trade Policy

An added twist on the cap policy allows firms to trade emission allotments between themselves based on the buyer of allotment bargaining with the seller over the proper price to pay for the extra allotment. A two-panel diagram is needed to better understand the logic of trading emission allotments. Figure 4 illustrates the marginal cost of reducing emissions of two firms. One firm is run on older technology with high abatement costs that goes from right to left with zero costs represented at the lower right-hand corner of the diagram. The other firm has newer technology in its plant with lower abatement costs that goes left to right with zero costs represented at the lower left-hand corner of the diagram. The width of the horizontal axis is the reduction in emissions that must be achieved overall to an efficient level.

The intersection of the two marginal cost curves is where economic efficiency is achieved. That is, the value achieved

Figure 4. Cap-and-Trade Between Firms Policy

Source: Econ 101: Carbon Tax vs. Cap-and-Trade, 2012, n.pag. from the last dollar expended on abatement must be the same across all firms in the market. This is known as the equimarginal principle (Boyes and Melvin, 2011,122). The total cost of attaining the efficient abatement/emissions level is equal to the area C + G + K. At the efficient level of emissions, e*, the low cost (of reducing emissions) firm should reduce more emissions than the high cost (or reducing emissions) firm. Such a policy can be implemented by issuing carbon permits to different firms and allowing them to buy and sell their permits in the open market. Normally, equal amounts of permits are issued to each firm since it is difficult to assess the true abatement cost a priori. In the end, the marketplace will help determine the differences in cost structure depending on how high a firm is willing to bid for an extra permit or two (Econ. 101: Carbon Tax vs. Cap and Trade, n. pag.).

As with the individual firm cap policy, the cap-and-trade policy is predicated on the government being able to determine the optimal level of total emissions desired reflecting social costs and benefits of reducing carbon emissions. Combining the different economic policy options together, it is obvious that it is possible to achieve the same level of reduction in emissions by setting a tax at the same level as where the marginal costs of reducing emissions is the same between firms which is at the level represented by the horizontal line in Figure 4 above. As above, the polluting firms will notice that it is cheaper to abate carbon emissions as long as the marginal abatement cost is lower than the tax. The firms with the higher cost structure will reduce emissions to e* when measured from right to left and incur abatement costs equivalent to area K and pay taxes equivalent to area B+C+F+G. The firms with the lower cost structure will reduce emissions to e* when measured from left to right and incur abatement costs of C+G and pay taxes equivalent to areas J + K in Figure 4.

Setting a cap on each individual firm will produce the same level of reduction in emissions, but given that it is difficult, if not impossible, to individualized caps based on different cost structures of abatement, an efficient outcome is difficult to achieve under such a policy even though emissions are reduced to the same overall level. Regarding the market failure due to the negative carbon externality, both a carbon tax and carbon cap-and-trade will achieve the same level of increased efficiency–assuming that measurements of costs and benefits can be measured accurately– by reducing emissions to the optimal level at minimum cost. The real difference in these policies is due to differences in the distribution of costs.

In the carbon tax policy, the government receives added revenues while in the cap and cap-and-trade policies when permits are simply handed out to firms, the firm has no additional outlays other than the cost of abatement to stay within the cap or to purchase additional allotment from other firms. If the permits are initially auctioned off by the government, the additional revenues to the government should be nearly the same as with a tax scheme if marginal social costs and benefits have been measured accurately. However, the economics-based policies are preferable to policies based on fiat where specific technologies (e.g., smoke-stack scrubbers) or a uniform cap on emission outputs across all firms since these other policies fail to take into account social costs and benefits. With regard to the economics-based policies, the following added impacts may also occur.

First, in addition to static efficiency–efficiency occurring within a single period of time–there may also be dynamic efficiency within these policy schemes whereby firms have an incentive to adopt new technology over time to reduce their marginal costs of reducing carbon emissions (Econ. 101: Carbon Tax vs. Cap and Trade, n. pag.). Secondly, carbon emission taxes and/or auctioning permits will generate additional government revenue that might be used to offset various distortionary taxes on labour and/or capital (Econ. 101: Carbon Tax vs. Cap and Trade, n. pag.).

Evidence and Analysis:

There are various problems associated with the design of emissions tax regimes warranting discussion. First, if such a tax were placed on individuals rather than firms without any offsetting changes in other taxes or government transfers, a carbon tax might be regressive suggesting that the highest tax burden would be placed on the poor (Poterba, 1991, 11). This is mostly applicable to gasoline taxes where a flat emissions tax would make up a higher percentage of the income of poorer over wealthier taxpayers; thus, an issue of equity arises here. Likewise, firms with higher profit margins would shoulder less burden from the tax than firms with lower profit margins given a similar costs of pollution abatement. Poterba (1991) suggests that this regressiveness could be offset by changes in either the direct tax system or in government transfers.

Second, as the population grows and production totals continue to increase to meet the demands of this growing population, emission taxes will need to rise to keep emissions at a particular level; this may lead to a set of distortions in terms of domestic vs. foreign production whereby firms can transfer production to other jurisdictions that do not have such taxes in place. Thus, international trade leads to an opportunity to get around the tax scheme and the higher the taxes instituted, the higher the incentive to engage in such behaviour.

Thus, if emission taxes differ significantly between two neighbouring jurisdiction–for example, the State of New York and Connecticut or even New York and one of its neighbouring Canadian provinces–there is an inherent incentive to move production outside of the jurisdiction with the highest taxes and import products from elsewhere. Third, a central issue regarding the design of carbon emissions taxes to harmonize such polities with other fiscal instruments designed to mitigate the effects of climate change. For instance, it is important to ensure that taxes on chlorofluorocarbons and emissions from fossil fuels are comparable to avoid distortions in consumption that may lead to a worse outcome for the environment than in the absence of such policies (Poterba, 1991, 27).

Bosquet (2000) conducted a review of the evidence regarding the impact of carbon emissions taxes on the environment and the economy. She claims that environmental taxes involve the shifting of tax burden from employment, income, and investment to resource depletion and waste. She asks the general question of whether such tax reform can produce a double benefit by helping the environment and the economy simultaneously.

Based on her reviews of the literature and available evidence, she concludes that when emissions taxes are instituted, they are generally associated with reductions in payroll taxes, and–if wage-price inflation is prevented–they often result in significant reductions in pollution and small gains in employment (Bosquet, 2000, 19). Also associated with the implementation of such environmental taxes are also marginal changes–gains or losses– in production in the short to medium term, while investments decease marginally and prices increase. However, she cautions that the results of such environmental taxes in the long-term are less certain (Bosquet, 2000, 29).

With regard to cap and cap-and-trade policies, the evidence is also available regarding the effectiveness and consequences of such policies. Stavins (2008) describes a graduated cap-and-trade scheme that involves initially just Carbon gasses with 50% of permits issued to polluters in the market free of charge and other half auctioned off. Over 25 years, the percentage auctioned off annually will gradually increase to 100% and other greenhouse gas emissions will be included over this time span. The idea is to implement a gradual iterative policy with a slow trajectory of emission reductions. As time goes on, other emissions are included in this scheme and the system provides for harmonizing this scheme over time with effective cap-and-trade systems and other emission credit reduction programs in other jurisdictions. This harmonization effectively addresses the issue raised with emission tax policies that are unilaterally established in one jurisdiction without consideration for the policies in neighbouring jurisdictions.

If there is an effective way to dovetail policies in different jurisdiction, then this would level the playing field between domestic and imported products. Regarding actual cap-and-trade policies already in place, Colby (2000) analyzes a cap-and-trade policy for limiting Sulfur Dioxide emissions. The changes stemmed from the Clean Air Act of 1990 which allowed for a nationwide cap-and-trade policy for industrial firms emitting sulfur dioxide into the atmosphere. Marginal costs of reducing emissions fell substantially duringn the 1990s due to reduced costs of installing scrubbers, reduced costs of flue gas desulfurization, and falling costs for low sulfur coal all due, to a large extent, to an active program of trading/buying allowances between firms that emerged after a few years of experience after the program was initiated.

As Colby (2000) states, “The allowance trading market enhanced competition among the different methods that firms use to control emissions, adding impetus to cost reductions” (Colby, 2000, 642). Low allowance prices and falling marginal costs associated with reducing emissions produced earlier-than-predicted cutbacks in sulfur dioxide emissions. Allowance prices rose from lows of $80-90/unit in 1996 to about $215/unit in mid-1999 spurring further conservation efforts.

Colby (2002) does mention that design and implementation of cap-and-trade schemes involves some important policy tradeoffs: equity among the players, balancing use levels with resource conditions, facilitating transactions between firms wishing to trade allowances, accurate accounting for externality costs, assuring adequate monitoring of emissions levels, and documenting welfare gains due to the policy. She says that efficient trading mechanisms can be more easily implemented when there is a strong political or legal mandate to cap resource use and trading allowances are sensed by all parties involved to be a way to ease adjustment to limits on emissions (Colby, 2000, 638).

In choosing between the various policies, it is inevitably important to sense the level of uncertainty over measuring the items of interest. With regard to emissions taxes, it is important to have fairly accurate estimates of marginal social costs and benefits and with regard to cap-and-trade schemes, there needs to also be a fairly accurate means of estimating the optimal level of emissions given all the costs and benefits involved in reducing emissions.

If it becomes difficult to measure these items accurately, then the expected deadweight loss and associate probabilities of various miscalculations needs to be assessed and compared across the different strategies to determine the policy that produces the smallest expected deadweight loss which is key from an economic perspective. Since policies based on fiat, such as technology mandates and non-economically based output standards, are not set with regard to these types of measures, it is likely that the deadweight economic loss associated with these policies will be greater than for either emissions taxes or better yet, cap-and-trade policies.


The evidence suggests that economics-based emissions policies are preferred over policies based on fiat. Moreover, the strongest evidence for promoting investment in pollution control equipment and reducing emissions that mitigate the effects of climate change appear to involve cap-and-trade policies. Partially, this might be due to the flexible design of such policies which—through the auctioning and/or trading of allowances—account for changing market conditions. This policy, even more so than emission taxes, forces the industry to face current market conditions through the use of auctions and trading for emission allowances. As a result, the parties are forced to make choices based on strong economic criteria to obtain efficiencies over time.

Works cited:

Bosquet B. 2000. Environmental Tax Reform: Does It Work? A
Survey of The Empirical Evidence. Ecological Economics. 34, 19-32,

Colby G. 2000. Cap-and-Trade Policy Challenges: A Tale of
Three Markets. Land Economics, 76, 638-658.

Econ. 101: Carbon Tax vs. Cap-and-Trade. 2012. Website.
Retrieved on June 5th, 2012 from http://www.env-econ.net/carbon_tax_vs_capandtrade.html

Melvin W. Boyes M. 2011. Microeconomics. 9th ed. Marion, OH: South-Western, Cengage Learning,

Poterba JM. 1991. Tax Policy to Combat Global Warming: On Designing a Carbon Tax. NBER Working Paper. MIT-CEPR 91-003WP. Retrieved on June 7th, 2012 from http://dspace.mit.edu/bitstream/handle/1721.1/50159/28596145.pdf?sequ

Stavins RN. 2008. Addressing Climate Change with a
Comprehensive U.S. Cap-and-Trade System. Nota Di Lavoro 67.2008 Fondazione Eni Enrico Mattei. Retrieved on June 7th, 2012 from http://www.feem.it/userfiles/attach/Publication/NDL2008/NDL2008-067.pdf

Cap and Trade Policy Paper Essay

Basic Manufacturing Cost Categories Essay

Basic Manufacturing Cost Categories Essay.

The term direct labor is reserved for those labor costs that can be essentially traced to individual units of products. Direct labor is sometime called touch labor, since direct labor workers typically touch the product while it is being made. Manufacturing Overhead Cost:

Manufacturing overhead, the third element of manufacturing cost, includes all costs of manufacturing except direct material and direct labor.

Enumerate and define the different classifications of costs On the basis of Nature or Elements: One of the important classification cost is on the basis of nature or elements.

Based on elements, it is classified into Material Cost, Labour Cost and Other Expenses. They can be further subdivided into Direct and Indirect Material Cost, Direct and Indirect Labour Cost and Direct and Indirect Other Expenses. 2) On the basis of Function: The classification of costs on the basis of the various functions of a concern is known as function-wise classification. Here, there are four important functional divisions in the business organization.

Viz. (a) Production Cost (b) Administration Cost (c) Selling Cost and (d) Distribution Cost.

3) On the basis of Variability: On the basis of variability with the volume of production cost is classified into Fixed Cost, Variable Cost and Semi Variable Cost. Fixed Costs are those costs which remain constant with the volume of production. Rent and rates of office and factory building are some example of fixed cost. Variable costs are those costs incurred directly with the volume of output. For example, cost of materials and wages to workers are the expenses chargeable with direct proportion to the volume of production.

Semi-Variable Costs are those costs incurred partly fixed and partly variable, with the volume of production. Accordingly, it has both fixed and variable features. For example, depreciations and maintenance cost of plant and machinery.

4) On the basis of Normality: Costs are classified into normal costs and abnormal costs on the basis of normality features. Normal costs are those incurred normally within the target output or fixed plan.

5) On the basis of Controllability and Decision Making: Based on the managerial decision making and controllability the classifications are as follows: (a) Controllable Cost, (b) Uncontrollable Cost, (c) Sunk Cost, (d) Opportunity Cost, (e) Replacement Cost, (f) Conversion Cost.

a) Controllable Costs: Controllable Costs are the costs which can be influenced by the action of a specified number of an undertaking. Controllable Costs incurred in a particular responsibility centre which is influenced by the action of the executive heading. For example, direct materials and indirect materials.

b) Uncontrollable Costs: Uncontrollable Costs are those costs which cannot be influenced by the action of a specified number of an undertaking. In fact, no cost is controllable; it is only in relation to a particular individual that may specify a particular cost to either controllable or non-controllable. For example, rent and rates.

c) Sunk cost: These are historical costs which were incurred in the past and are not relevant to the particular decision making problem being considered. While considering the replacement of a plant, the depreciated book-value of the old asset is irrelevant as the amount is a sunk cost which is to be written-off at the time of replacement. Unlike incremental or decremental costs, sunk costs are not affected by increase or decrease of volume. Examples of sunk cost include dedicated fixed assets, development cost already incurred.

d) Opportunity Cost: Opportunity cost means the cost of forgoing or giving up an opportunity. It is the notional value of going without the next best use of time, effort and money. These indicate the income or potential benefits sacrificed because a certain course of action has been taken. An example of opportunity costs is the market value forgone or sacrificed when an old machine is being used.

e) Replacement Cost: Such expenses may be incurred due to factors like change in method of production, an addition or alteration in the factory building, change in flow of production etc. All such expenses are treated as production overheads; when amount of such expenses is large, it may be spread over a period of time.

f) Conversion Cost: Conversion costs are those costs which are incurred while converting materials into semi-finished or finished goods. It is the aggregate of direct wages, direct expenses and overhead costs of converting raw materials into finished products. Differentiate variable and fixed cost

Fixed costs are costs which remain constant within a certain level of output or sales. This certain limit where fixed costs remain constant regardless of the level of activity is called relevant range. Variable costs are costs which change with a change in the level of activity. Examples include direct materials, direct labor, etc.

Basic Manufacturing Cost Categories Essay

The Advantages of Target Costing Essay

The Advantages of Target Costing Essay.


Mobi Plus Ltd produces mobile phones for sale in various shops and supermarkets. In today’s competitive market where mobile phones have a short product life cycle, it is important for producers to develop and market products that not only meet the customers demand for features and applications at a certain price level but also generate the desired profits to make it a viable business model. This essay analyses the benefits and limitations of using target costing and life-cycle costing systems over the costing and performance measures currently being utilised by the company.

The techniques currently being used by the company are useful for keeping costs under control, but they do not give an indication of the maximum costs the company can allow for designing new product features or profits over the total life cycle of a product.

Target costing.

Target costing is a pricing method used by companies as a cost management tool to determine the maximum cost at which a product must be produced to generate the required rate of return to earn the required profit margin The cost control techniques that are currently being used by the company are useful in managing costs during the initial production stage, however, moving cost management from the production stage to the product development stage generates increased profits due to lower costs .

This is particularly useful for companies producing goods for the re-sale market as the re-seller (shops and supermarkets etc) drive tougher bargains as they have their own profit margin to include in their sell on price. The planning, design and development stage of a product is critical to a companies’ cost management process, particularly in an industry where product lifestyles are short.

The benefits of target costing are increased if specific targets for costs and product features are established earlier in the product development cycle rather than during the production process. Cost analysis in the early stages of the product design and development may indicate whether it is feasible to produce a mobile phone that will meet customers’ expectations of price and quality whilst generating the desired level of profit. The target costing concept may prove less effective should Mobi Plus Ltd decide to focus on meeting fast time-to-market demands. This would lead to a shorter time-scale to launch a new mobile phone, and therefore impact on the amount of time available for design and development stages. It is also difficult to forecast future price and costs to rapid technology developments in the mobile phone market and changes in the demands of customers.

Life-cycle costing systems

The competitive nature of the mobile phone sector means that equipment manufacturers have to work with lower profit margins and shorter product lifecycles, whilst investing a significant amount of their budget on the production and development of new products and technologies. This means that costing methods such absorption costing systems are less useful, because they neglect research and development costs in evaluating profitability of a product and only look at actual production costs.

Life-cycle costing systems give a more accurate evaluation of costs and profitability, as they look at costing from the initial research and development phase right through to the eventual conclusion of a product’s life. This is a particularly effective cost management tool for a company such as Mobi Plus Ltd to use to forecast the overall profits from a product like a mobile phone that has high development costs.

The major challenge that Mobi Plus ltd would face using the life-cycle costing system is that, due to the constant need for developments in mobile phone technology, and the number of competitors constantly releasing newer products, it is very difficult to forecast the exact lifestyle of a particualr product.


Target costing would be an effective tool for Mobi Plus ltd to use in place of the current costing and performance techniques used, as it would enable them to forecast the maximum costs available during the design and development phase, making it easier to effectively cost products to generate the required level of profits. Life-cycle costing is useful as it would incorporate the high development costs and short product lifecycle in determining the feasibility of a product.

The Advantages of Target Costing Essay

National Cranberry Cooperative Essay

National Cranberry Cooperative Essay.

1. Develop a process flow diagram for processing cranberries (both wet and dry). Show the capacities at the different stages.

2. What are the sources of variability affecting NCC’s operations? There are different sources of variability that are affecting NCC’s operations. • NCC received both fresh fruit and process fruit in its business. Fresh fruit is a labor-intensive process that uses more workers during a peak season. Process fruit is a highly mechanized process that uses different processes. There is no problem with fresh fruit processing, while it faced some problems in process fruit processing such as waiting time on unload process, increasing cost of trucks etc.

(National Cranberry Cooperative, 1983).

• NCC also used two types of harvesting system in this business such as water harvesting and dry harvesting. Water harvesting generated 20% more yield in the business as compared to dry harvesting. • It is also considerable that wet berries are directly sent to dechaffing units, while for dry berries, destoning process is necessary before dechaffing process.

These are some variable sources that are used by NCC and that affect the NCC’s business operation and its effectiveness.

3. Suppose that a peak harvest-season day involves 18,000 barrels of berries, 70% of them wet harvested, arriving uniformly over a twelve-hour period from 7 a.m. to 7 p.m. Would trucks have to wait to unload? When during the day would trucks be waiting? How much truck waiting time would you expect? What is the maximum number of trucks waiting during the day?

• Total barrels of berries in 12 hour time period = 18000 bbls

• Holding bins capacity for wet berries = 3200 bbls (It is assumed that holding bins 17-+24 will be used for wet berries due to peak season, so total capacity will be 3200 bbls. [(250*8)+(400*3)].)

• Holding bin capacity for dry berries = 4000 bbls (16*250)

• Average capacity of truck = 75 bbls

• Number of trucks per hour = 14 (1050/75)

• The average wet berries arrival rate = 1050 bbls per hour [(18000/12)*70%]

• The average arrival rate of dry berries = 450 bbls per hour [(18000/12)*(30%]

If it is assumed that processing will start at 7:00 am, then the holding bins will continue to be filled at the rate of 1050 bbls for wet berries and 450 bbls for dry berries. The holding bins that are capable to hold wet berries will be filled completely after 3.03 minutes (i.e. 3200/1050) and that will be at 10:03 am. The trucks that carry wet berries will have to wait after that. At the same time the process will start from 11:00 am in this four hour time period (i.e. 7:00 am to 11:00 am) and the quantity of wet berries will be 4,200 bbls (i.e. 1050*4) and for dry berries it will be 1,800 bbls (i.e. 450*4). Holding bins are not capable to hold all bins so an excess of 1,000 bbls will wait on arriving trucks. The process will start at 11:00 am for dry berries with 600 bbls per hour that are higher than the rate of its arrival. The 1,800 bbls of dry berries will decline at the rate of 150 bbls per hour.

The process for wet berries will also start at 11:00 am with a rate of 600 bbls per hour that is less than its arrival rate. It will cause growing queue of trucks until 7:00 pm. This will cause 7,800 bbls in system and 3,200 in bins and the rest will be in the truck. The trucks would continue to unload until 2:40 am and the process will continue until 8:00 am. The berries that will be processed are 600*12 – i.e. 7,200 bbls. The total waiting hours for trucks will be as follow as shown:

• Processing rate = 600 bbls per hour

• Arrival rate = 1050 bbls per hour

• Processing time for 3,200 bbls of wet berries = 5.3 hours or 5.18 minutes

• Next process will start at 3:24 pm.

• Total berries processed = 3200 + 2016 (3.36*600) = 5216

Any remaining berries will be on truck, which means the trucks will have to wait for (12600-5216)*(15.24-10.03)/2/75 = 256. 5 truck hours

[15.24 equal to 3:24 pm]

Total number of trucks = 18.32 or 19 (256.5/14) trucks

So…from the above calculation, it can be shown that trucks have to wait to unload after 10:03 am for a total of 256.5 truck hours. The maximum number of trucks that will wait in a day will be 14.

4. If it costs $20 per hour to rent a truck and driver, how much money is spent by truck waiting on a peak day? • Total number of truck hours to wait = 256.5 hours

• Cost per hour = $20

• Total cost spent by truck waiting on a peak day = $5130 (256.5*$20)

5. Is the investment in a light meter system a good option? The investment in a light meter system is a good option because it will help in grading color, which is beneficial for the company, to increase its yield. The projected cost of this system is $10,000 and a full-time qualified operator is also required for this system, whose pay grade is the same as the chief berry officer.

So the additional cost that would be generated by this system is only $10,000 and that can be covered by the NCC in the coming year due to the increase in its yield. By using a light meter system that would accurately grade berries, they would save $112,500 [(450000*0.5)/2] per season and can easily cover both the investment cost and employee cost. It will also help in grading of color in an efficient manner as compared to using color pictures that classified berries as Nos. 1, 2A, 2B and 3 (No 1 = poorest color and No. 3 = best color).

National Cranberry Cooperative Essay

Bill French Case Essay

Bill French Case Essay.

1. What are the assumptions implicit in Bill French’s determination of his company’s break-even point? * He has assumed that there is just one breakeven point for the firm (by taking the average of the 3 products). * He has also assumed that the sales mix will remain constant. Total revenue and total expenses behave in a linear manner over the relevant range. * Since the capacity is being expanded to increase production of Product C, it could be assumed that this increase should be allocated to this product.

Production of Product A is to be scaled down, but its level of fixed costs has been assumed to be unchanged. * Constant dividends are paid out to the company’s stockholders. * Labor union will not significantly affect cost structure. No substantial changes in product prices.

2. On the basis of French’s revised information, what does next year look like?

a. What is the break-even point?
The break even unit for the aggregate production is 1,035,686 units.

Calculation of the break even points using the new estimates: Breakeven points have been calculated using the formula: Breakeven number of units = Fixed costs / Contribution margin per unit, where Contribution margin per unit = Selling price – Variable cost per unit

b. What level of operations must be achieved to pay the extra dividend, ignoring union demands? To pay the extra dividend of 50% and to retain the profit of 150,000 we need to have the profit after taxes as 600,000. As half of the revenues go to the government as taxes therefore the total revenues before tax deduction should be equal to 1,200,000.

c. What level of operations must be achieved to meet union demands, ignoring bonus dividends?

d. What level of operations must be achieved to meet both union demands & bonus dividends?

3. Can the break-even analysis help the company decide whether to alter the existing product emphasis? What can the company afford to invest for additional “C” capacity? Break even analysis can be used to decide whether to alter the existing product emphasis or not. In this case, based from previous year’s data, it is not feasible to manufacture product C at 2.40 / unit. Below table provides checking whether the company can afford to invest in additional C capacity.

4. Calculate each of the three products’ break even points using Exhibit 3. Why is the sum of these three volumes not equal to the 1,100,000 unit’s aggregate break-even volume? The sum of three break even volumes does not equate the aggregate break even volume because of varying fixed costs. It is illustrated in the below table:

Question 5: Is this type of analysis of any value? For what can it be used?

Break-Even analysis explains the relationship between cost, production, volume and returns. It can be extended to show how changes in fixed cost, variable cost, commodity prices, revenue will affect profit levels and break even points. Break even analysis is most useful when used with partial budgeting, capital budgeting techniques. The break even analysis helps understand and formulate the relationship between costs (fixed and variable), output and profit. The technique can be used to set sales targets and/or prices to generate target profits. In a wide product range, the analysis helps to find out which products are performing well and which are leading to losses .It is also versatile enough to include items like donations, wage increases, etc. that directly or indirectly affect costs.

Bill French Case Essay

Amitrade: a Problem Excercise of Cost of Capital Essay

Amitrade: a Problem Excercise of Cost of Capital Essay.

The course material covered in weeks 4 and 5 should be sufficient for doing this problem set. The questions below are for the Cost of Capital at Ameritrade case in your course packet. You can find the data for this case on the course website in a spreadsheet named Ameritrade.xls.

Please turn in your problem set solutions by posting them to bSpace as an Excel file or pdf file. Upload a single solution for each group, with all group members listed on the first page.

If you turn in an Excel file, make sure the grader can understand what you did without clicking on any cells. To make that possible, please include cells with appropriate explanations of what you did.

This problem set is due by 9:00 a.m. on Wednesday, 11/28. No late assignments will be accepted.

Questions: Assume that the investments under consideration will be financed with equity only (i.e., no debt financing).

1. What estimate of the risk-free rate should be employed in calculating the cost of capital for Ameritrade?
2. What estimate of the market risk premium should be employed in calculating the cost of capital for Ameritrade?
3. Ameritrade does not have a beta estimate since the firm has been publicly traded for only a short time period. Exhibit 4 provides various choices of comparable firms. What comparable firms do you recommend as the appropriate benchmarks for evaluating the risk of Ameritrade’s planned advertising and technology investments? Hints for #3:

• It does not matter what Ameritrade spends its investments on up-front (advertising and technology investments) since these costs are known numbers, and you are calculating the cost of capital to figure out the present value of the projected cash flows from later years. What matters is what beta the firm’s assets will have, where the assets are the subsequent cash flows that Ameritrade gets out of making the up-front investments.

• It is probably not useful to use a comparable that has very little data (less than 2 years, say) since the equity beta you estimate based on very little data will be very noisy (you can try it—look at the standard error on your estimated equity beta).

Hints for #4:
βE : To estimate the equity betas, here are some hints:

• Please regress (raw) stock returns on (raw) market returns—you are not given a time series for the riskless rate, so you cannot run the regression using excess stock returns and excess market returns (over the riskless rate).

• You use the market returns from Exhibit 6, but you’ll have to discuss with your group members whether you should use value-weighted or equal-weighted market returns. (The equal-weighted market return sets all the xi ’s to be equal.) • For some of the stocks you are given data for stock prices and dividends rather than being given the stock return directly. Some of the stocks have undergone stock splits.

Amitrade: a Problem Excercise of Cost of Capital Essay

Starbucks Cost Structure Essay

Starbucks Cost Structure Essay.

How Starbucks minimizes the impact of coffee prices
I believe there are two explanations for the “irrelevance” of coffee prices.
1. Purchase contracts
2. Hedging
Purchase contracts
Starbucks buys most of its coffee from suppliers through fixed-price commitments. This means that it won’t feel the effect of short-term fluctuations in coffee prices, as the price and quantity are fixed. I estimate that these commitments typically last around a year.


Another way Starbucks can minimize its commodity risk is through hedging. Typically, the company will make an arrangement to sell coffee on a specified future date (it buys a future).

This means that it earns money when coffee prices increase, and hence this cancels out the input cost risk.


Think about the commodity costs and margins this way: despite increasing commodity costs in 2011 and 2012, Starbucks was capable of improving its margins. In 2013, commodity costs will most likely decline, so Starbucks doesn’t even need improved operational performance to improve profitability. Therefore, I think Starbucks has a lot of potential in the short run (especially if the imperfect hedge will benefit the bottom line), but I am also decently optimistic on the long-run prospects of Starbucks.

I plan to follow this article up with other in-depth articles about Starbucks, which will elaborate on my long thesis.


Starbucks recently announced a revamped pricing structure. Prices for many of its popular (read: lower-end) products such as brewed coffees and lattes are headed downwards. A spokesperson claims that this is the first time in Starbucks’ history that prices have been reduced. According to an article written by Claire Cain Miller in the New York Times, the coffee purveyor is also redesigning its menu to feature lower priced brewed coffees, as well as offering promotions on iced drinks. This strategy makes sense: the struggling economy dictates discounts and McDonald’s brewed coffees and lattes are stealing price sensitive customers.

Paradoxically, Starbucks is also increasing the prices of its higher-end more complex drinks including Frappuccinos and caramel macchiatos, of which there is less competition from rivals. In some cases, prices are rising by 30 cents (8%). There is some justification for this price increase. In Starbucks recent quarterly earnings release (third quarter ending June 28), same store sales in the U.S. were down by 6%. Broken down, 4% of this decline was due to fewer transactions (customers defecting to McDonald’s, for instance) and the remaining 2% from a decrease in average value per transaction. Thus, for the most part, customers who continued to patronize Starbucks spent the same amount on each visit.

So why raise prices right now when demand is waning? Some speculate that Starbucks is trying to make the most profit from its devoted customers who are hooked on its products. In other words, its specialty drinks are in the cash cow phase of the Boston Consulting Group’s Growth Share Matrix. For products in this cash cow phase, the general recommendation is to reduce investments and simply harvest profits from current demand.

All successful products have their heyday of strong growth and then eventually reach a point where demand remains constant or decreases. After all, remember when CB radios and radar detectors were the rage? When a product reaches the cash cow stage of its lifecycle, the general strategy is to take the money and run. What are the chances that macchiatos will experience a growth surge in the future?

With rivals (including McDonald’s and Dunkin Donuts) stealing share from Starbucks’ lower-end products and concerns about the growth of its highly differentiated premium coffee drinks, what’s the growth driver that justifies Starbucks’ current price to earnings ratio of 59? This high p/e ratio indicates that investors feel the company has higher potential growth opportunities than the average company (in contrast, GE’s p/e ratio is 10.5 and Wal-Mart’s is 15).

A company’s pricing strategy can be a good indicator of its future growth potential.


A weak cost structure means Starbucks’s costs are high in comparison to their competitors

Starbucks Cost Structure Essay

Holt Renfrew Essay

Holt Renfrew Essay.

Executive Summary

Holt Renfrew, is high-end retail chain for designer fashions and cosmetics that imports their products from Europe, Asia and USA. They are facing some challenges regarding the size of their current warehouse and inventory levels. The warehouse is not big enough to accommodate all their inventory and as such goods are always scattered everywhere. They are also finding it difficult to track their orders, due to the fact that they do not have an updated Enterprise Resource Planning (ERP) system to help them track these orders.

They follow up over the phone which is never accurate. For this reason, they hardly how much goods are coming in and what to expect at a particular time. This has also created an issue of stock outs. These issues need to be addressed to ensure customer order fulfillment. Different options have been made available to help Holt Renfrew address these issues which are improving the physical structure of the warehouse by installing mezzanines, outsourcing warehousing to a third party or building/leasing a new warehouse, modernizing their distribution process and human resource reallocation.

Upon review of the different options, the most favourable one for the company would be to install mezzanines. By installing mezzanines, the physical layout of the warehouse will be increased and it will create more room for inventory. The new available space will accommodate the extra products, usually scattered on the ground as well as the ones that are usually sent to the secondary warehouse where unsold goods are kept. This will enable the company shut down the secondary warehouse and save that extra cost of leasing, since the newly installed mezzanine will now owned by the company. This will save the company a total cost of $540,000 per year that is used to lease the secondary warehouse in Mississauga. A proper and updated ERP system will also need to be installed for the company to keep track of their inventory records.

The human brain is never as effective as machines when it comes to record keeping. This will produce accurate records so that the company knows exactly what to expect, how much to expect at any given time and will be able to provide equal storage bins for the products. This will solve the issue of clustered merchandizes scattered everywhere, causing health and safety hazards. Once these strategies are implemented, Holt Renfrew will enjoy continued substantial growth and business sustainability because they will now be able keep track of their inventory and store them accordingly. There will no longer be the issue of stock outs and customer fulfillment will be at the highest level. They will also be able to increase profit, while maintaining and increasing their market share.

Situational Analysis

Holt Renfrew is a high-end Canadian retail chain based in Toronto, Ontario. It was founded in 1837 as a hat and fur shop and is owned by The Wittington Group, headed by Canadian business leader Galen Weston. Tony is a new employee and will have to prepare a detailed plan that will identify the major steps he intended to take in his new position. He will do this well because new employees are more likely to introduce radical change into an organization than old employees. Peak sales for the company are in March/April, July/August, and November/December but used publicity campaigns for promotion. This meant more advertising cost and less sales for Holt Renfrew for half of a year. There is need for marketing and sales improvement.

The company has approximately 3,000 suppliers but only 1,000 are used in a typical year. Secondary warehouse was used to store items that were not sold in the store which is a huge waste of a whole 60,000 sq. ft. facility. There is no need for that additional facility since it increases direct and overhead costs. It should be eliminated. The DC is cluttered with merchandise everywhere, under conveyors and scattered across aisles. Tony considered three strategies: improving the physical structure and process flow in the distribution center, the modernization of distribution systems and business processes, and to reallocate human resources. He had to obtain goods from the companies international suppliers and quickly distribute them to their stores within Canada to gain competitive edge.

It will be dangerous not to do anything about the issues the company is facing. Even though the company will save a little cost by doing nothing now, it will have long term effects because if they keep dissatisfying their consumers by not delivering their orders on time because of the issue of stock outs, and no space to put inventory, they will have a reduced market share, which is not good for any company.

It is my recommendation that mezzanines be installed in the current warehouse. This is the best option because it is the most cost effective, least expensive and less time consuming. Tony estimated that the cost of installing a 20,000 sq. ft. mezzanine to accommodate the inventory is $1 million dollars, which is much less than the cost of leasing/building or outsourcing. The current activities of the warehouse will not be disrupted and the geographical location will not shift. There will be no additional cost of marketing any new location and the mezzanines will be engineered to Holt Renfrew’s specs. Another important consideration is ownership, it will be owned and operated strictly by Holt Renfrew. Once there is a mezzanine installed and more room to store inventory, health and safety concerns will be reduced because the products will be stored perfectly. Tactical Improvements

A project team should be set up that will oversee the installation of the mezzanines over the period of installation. Mezzanines should be bought from ArcForce Mezzanines. They are manufacturers of this product which makes their own price cheaper than most other dealers. Their skilled staff will assist the project team from the project conception through completion with insight, experience and engineering integrity. The design engineers will customize any steel mezzanine storage system to meet Holt Renfrew’s warehouse requirements. Once purchased, work should begin immediately and installation should get started. After the installation is complete, management will need to constantly follow up and inspect the mezzanines regularly to ensure it is utilized effectively, and maintained.


Holt Renfrew has faced several issues regarding their stock keeping unit. This has led to stock outs, delivery inconsistences and lack of space in the current warehouse due to bad record keeping. However, from the recommendation given above, this issue will be resolved but not completely, giving the warehouse enough room to store their inventory. Once the mezzanine has been installed, the next action plan should be to get an up to date ERP system that will enable the staff keep proper record and track of their inventory. If the mezzanines are built and there is still no proper track kept, the issues will not be solved completely. They will still be unsure of their inventory supplies. The complete solution will be to install the mezzanines and then immediately after, update the ERP system.

Ivey Case Study- Holt Renfrew. (2012) StudyMode.com. Retrieved from http://www.studymode.com/essays/Ivey-Case-Study-Holt-Renfrew-937118.html

Hi-Cube Blog (2013). All about Structural Mezzanine. Retrieved from http://blog.hicube.com/blog/bid/280503/All-about-Structural-Mezzanine

ArcForce Mezzanines (n.d). Custom Steel Industrial Mezzanines -Direct from the Manufacturer! Retrieved from http://www.arcforce.com/default.htm

Holt Renfrew Essay

New Jersey Insurance Company Essay

New Jersey Insurance Company Essay.

1. In what ways does Mr. Somersby control the operation of the sections of his division? In what ways does top management control the operations of the law division? Mr. Somersby controls the operation of the division by requiring reports from each section of his division. Which such reports he was able to monitor the performance as well as the expenditures of each section. The law division has about five sections to which two of them seem more crucial than the others.

This is because such section handle accounts that can either make or break the financial status not only of their division but of the company as well. Because of the importance of such sections, Mr. Somersby conducts conferences with the sections in order to determine if there are any problems during their operation and to prepare for future developments. The top management controls the law division by monitoring the financial standing of the division through the required reports that they acquire.

They screen discrepancies and questionable differences in cost through comparison with the division’s previous financial report. They are able to do because of the established standard they have set from their years of experience [most of the employees have been retained due to their costly training. Thus, hiring of new employees are avoided unless needed] and frequent transactions in their “routinary” operation. They require the division to set budgets, and monitor their projected costs from their incurred cost. The same goes to Mr. Somersby. When large deficits are detected they questions such occurrence in order to justify the incurred cost or to make certain actions for the situation to desist.

2. What possibilities for improving control, if any, do you think should be explored? Since budget plans seems to be crucial in their company, they should try to establish more definite parameters for their reports especially for the corporate loan division. They should incorporate the factor of TIME with their reports. For doing almost “routinary” transactions and for handling such situations for a longer period of time, the examiners should have a clearer gauge as to how long their transactions would be. By sending reports on a timelier manner they would be able to have more reliable figures for their budget estimates. As for larger accounts [like those of the corporate loans], they should also try to consider not only outsourcing on the legal matter but for investment matters as well. They could consider hiring consultants that have a larger network in these matter in order to have a broader reference in the evaluation process.

These financial experts might be able to help them more in accessing mortgages, company and individual net worth and the market standing of any investment. With this, just like on legal matters, these too can be a form of marketing, because they can claim to have a more reliable service because of the presence of financial experts that are not tied with their company. [Thus unbiased reports and projections]. They should also coordinate with the government in some cases so that they could keep track and prepare for any policy changes in their area that might affect the prices of their resources but that of their needed inputs as well.

3. As Mr. Montgomery, what comments would you make and what questions would you ask Mr. Somersby about the performance of the two sections of the law division for the first 6 months of 1987? As Mr. Montgomery, my comments for Mr. Somersby would be as follows: There have been huge deviations on the projected budget and the actual budget of the law division. More particularly, the individual loan section has incurred most of those deviations. From the figures, it seems that the corporate loan section had lesser number of transactions compared to their previous year. It seems that the individual loan section has employed an outsider which is different because their division has carefully trained and well experienced examiners, and has not required to have one from the previous years. The questions would be as follows:

What are the reasons of the over budget? What are your plans in order to prevent your division from incurring these deviations? Why was an additional labor for the individual loan sections made? How come the budgeted number of employees was 26 and the actual number of employees was 24? Since, employing additional labor for the individual loan section happened, is there a need to employ a new permanent worker? Were some of the people from the corporate loan section laid off? Are there any management problems in the corporate loan section? Have you considered employing financial experts instead of outsourcing them? What would become of the division then?

New Jersey Insurance Company Essay