Free «EOM Questions» Essay Sample
Matching of costs and activity
Research shows that recording of activity and costs in different time periods reduces accuracy in any organization (Maher, Stickney & Weil, 2008). This will lead to the tendency of an organization to overestimate or underestimate the costs of the produced commodities and services. Therefore, it is necessary to match costs and activities in a single observation to increase accuracy, which is a significant factor in production. Accuracy will increase profitability and productivity of an organization, because the allocation of money to different activities will be extremely effective (Maher, Stickney & Weil, 2008). Organizations will minimize or avoid the wastage of resources, especially money, altogether by matching the costs and activities. However, the matching problem has been evident within short time duration (Maher, Stickney & Weil, 2008). Therefore, matching costs and activities may not be appropriate when the available time is insufficient.
Direct labor, manufacturing overhead, and direct materials
Research has shown that in the past century, direct labor, manufacturing overhead and direct materials have undergone change relative to the percentage of manufacturing costs (Maher, Stickney & Weil, 2008). Direct materials have undergone a slight increment relative to the percentage of the total manufacturing costs. The manufacturing overhead has undergone a significant increment relative to the percentage of total manufacturing costs. On the other hand, direct labor has declined significantly relative to the percentage of total manufacturing costs (Maher, Stickney, & Weil, 2008). The manufacturing overhead was small in the past, which could make it possible for people to ignore the overhead and consider the units of services or products as the principal cost drivers (Maher, Stickney & Weil, 2008). Because the manufacturing overhead has undergone a significant increment over time, units of the final services and products have ceased to be an appropriate explanation of the changes that the manufacturing overhead experiences (Maher, Stickney, & Weil, 2008).
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