Cost Identification - Essay Example

PROJECT Cost Identification Direct and indirect costs Gartner, a leading research firm, pointed out that Lenovo had overtaken HP as the leading manufacturer of personal computers (PC). This revelation points on the efficiency of the company in its manufacturing field, as well as its sales unit. This nominates the company for cost identification task. A reflection on their current books of accounts from the company indicates various expenditures accrued by the firm during its production period.

Focusing on the Ideapad, a smart PC enlisted by the company, the product has witnessed a wide expense in terms of cost. This is calculated from the direct cost which includes expenses in issues such as revenues, selling and distribution expenses, as well as the cost of development. Others include government revenue on production, as well as shipping costs. These are coined together as the selling and distribution expenses. The costs are engaged directly by the company in the effort of manufacturing the product and distributing it into the market.

The company enlists this expense as the central indicator of their path to achievement (Lenovo, 2013).Subsequently, the company experiences yet another set of expenses that is coined under the name of indirect cost. On reference is the expenses that are associated to proceedings that are not unswervingly connected to the production and sales lines. They include an increase in the cost of production due to issue such as inflation, which foresees the increase in the cost of inputs. Others include restrictions on considerations such as environment pollution.

Others include the cost incurred on rent, energy, maintenance and internal communication, amongst others. Such costs are accrued in an effort to better quality of the product but are not specific on the product on reference. They may cover all the products in the production line (Lenovo, 2013).Variable and fixed costsRegarding the variable and the fixed cost, various illustrations focusing on these aspects can be fetched from the financial records of the company. Fixed costs include expenses such as rent (property), equipments and units (plant), amongst others.

These costs are constantly engaged with minimal variation. The enlisted variable cost include expenses on topics such as wages, upgrade of infrastructure, payment of leases and other utilities necessitated in the process of production. Such costs are set to vary in the course of production (Lenovo, 2013).Value added and non-valueA further analysis on the financial records posted by the company identifies yet another set of expenses. This includes the value added expenses and the non-value added costs.

The central reference upon which the two costs are framed include the impact they nest on the eventual product and the profitability of the company (Harrison, 2001). Cost incurred under the concealment of research and advancement can be listed under the value added cost. Subsequently, the expenses incurred under the umbrella of wages and marketing focus on the improvement of the two regions of concern, hence they amount to value added costs. However, the costs incurred under avenues such as taxation based expenses, product delivery and sales expenses amount to non-value added expenses.

Lenovo has steered a gross amount of effort towards the minimization of such expenses. This assures increased productivity of the company in whole (Lenovo, 2013).Product and period costsA successful period of production is, also, marked by yet another form of expenses. These are categorized under the impact upon which they impose to the company. Lenovo has experienced both product based and period based expenses. The product based expenses are indicated by issues such as the cost on research and advancement, in addition to the cost on raw materials and wages.

Such costs are accrued with respect to the product in production. Subsequently, the company has also posted period based expenses. This is with respect to the scenarios shaping the environment of operation. Such scenario includes market saturation and external government policies (Elliott, 2008). On this regard, the company registered increased expenses in terms of marketing costs and revenue clearance (Lenovo, 2013).Other costsWith regard to the Ideapad, various inputs associated to the production of the product are enlisted.

They include concerns such as direct material where the company registers costs engaged under the supplies of various items, including silicon chips. Subsequently, the notes section of the financial records enlists wages as costs incurred via the employees deployed to perform various tasks towards the success of the company. They include employees tasked with the production of the Ideapad. Subsequently, the company has enlisted various costs that can be categorized as overheads. This includes donations towards various charitable organizations, office equipments and supplies, premise beautification, and branding amongst others (Lenovo, 2013).

ReferencesElliott, B., & Elliott, J. (2008). Financial accounting and reporting. Harlow: Financial Times Prentice Hall. Harrison, W. T., & Horngren, C. T. (2001). Financial accounting. Upper Saddle River, NJ: Prentice Hall.Lenovo (2013), 2012/13 Interim Report Lenovo Group Limited. Retrieved on 1st January, 2013 from http://www.lenovo.com/ww/lenovo/pdf/report/E_099220121121d.pdf