Cash Flow Analysis and the Fund's Statement - Essay Example

Failing to provide the cash flow statement, the company will lack the proper information on telling the sources of cash and its use. Additionally, the company will not have adequate planning tools for its business success in the long term (“Cash flow statements”, 2000).

To improve operations, I would compare the expenses that accumulate for a given operation to its budget and provide management warning if the expenses appear to be ahead of projections (Lawrence, 2004). This will give the company time to control costs over the remaining part of the project. I would also approach the client about the increase in billing to cover the cost overrun. Assuming the costs are reimbursed to the clients, I would carry out cost precision where the customer will pay all the expenses incurred plus the revenue. Some of the accounting activities that I would take into consideration will be the cost of materials, cost of labor, and overhead. I would use cost information history to arrive at standard rates and then assign these standard costs to jobs based on the activity units (Drury, 2002).

6.

I will allocate the manufacturing overhead cost via Departmental machine hours (Innes & Mitchell, 2003). This is because manufacturing companies study and control the time for direct labor and motion. They have started using machines to replace direct labor. Using machines increases the factory overhead due to machinery depreciation, machinery maintenance, and setup of machines. Reducing the direct labor and increasing the manufacturing overhead, the correlation between the manufacturing overhead and direct labor tends to wane. Therefore, the logical response is to allocate manufacturing overhead based on machine hours rather than direct labor hours (Carroll, 2004).

7.

I would use break-even analysis to determine the optimum output level below which will not be profitable for a company to produce (Cafferky & Wentworth, 2010). I would also determine the target capacity for the company to get the benefit of the lowest cost of production unit. Additionally, the break-even analysis will determine the lowest cost for a certain output level. With the help of break-even analysis, I would help the company in deciding the type of services and products that the company needs to produce. Consequently, I would influence the price and cost changes on the firm’s profit using the technique of break-even (Hammel & Goulet, 2009).

8.

Budgeting normally represents an in-depth analysis of how an organization is expected to spend its cash in the future period. Most companies create budgets yearly. This is important because it helps them outline the needs of each business department (Mason, 2011). Using a yearly budget also limits the time companies spend managing and creating capital resources. Budgeting is important because it helps an organization plan for the expansion and growth of businesses. Companies also budget to improve capital. The capital saved may be used during economic depressions as a safety net to pay the regular expenses of businesses. Companies budget for the next financial year by gathering and collecting information from the accounting department of a company and creating simple processes to create and manage budgets. Collection and gathering of information are done using an accounting software package (Moose, 2007). Read More