Managerial Accounting and Organizational Controls - Essay Example

Under the elimination of costs, one of the secretaries under the administrator would need to be eliminated. However, security would not be affected because it is a factor that is very necessary within a mental health agency. Dr. White could begin preparing for reduced budgets by, first, advising the present staff of the proposed eliminated in costs. She should advise them that the costs are necessary in order to maintain the operation and well-being of the agency. Additionally, Dr. White could also review the resumes of the present employees and interview them again to derive more of their skills.

These skills could be used to replace the services that will be eliminated by the proposed budget cuts. Under the traditional method, the cost of advertising and warehouse expense allocated to both of the two major businesses, one manufactures and sells unicycles for commercial use in circuses, etc. and the other sells bicycles to the public, was 2.5 million for the cost of advertising and 1.5 million for warehouse expense. Since the business that manufactures and sells unicycles for commercial use yields a greater profit (150 million) than the business that sells bicycles to the public (20 million), it is recommended that the majority of the cost of advertising and warehouse expense be allocated to the business that manufactures and sells unicycles for commercial use.. Part B: Under the traditional method, the cost of advertising and warehouse expense allocated to both of the two major businesses, one manufactures and sells unicycles for commercial use in circuses, etc.

and the other sells bicycles to the public, was 2.5 million for the cost of advertising and 1.5 million for warehouse expense. Since the business that manufactures and sells unicycles for commercial use yields a greater profit (150 million) than the business that sells bicycles to the public (20 million), it is recommended that the majority of the cost of advertising and warehouse expense be allocated to the business that manufactures and sells unicycles for commercial use. Moreover, $4,937,500 should be allocated for the cost of advertising to the business that manufactures and sells unicycles for commercial use, and only $62,500 should be allocated for the cost of advertising of the business that sells bicycles to the public.

Additionally, $2,962,500 should be allocated for warehouse expense to the business that manufactures and sells unicycles for commercial use while only $37,500 should be allocated for warehouse expense to the business that sells bicycles to the public. However, there are certain issues that may arise from allocating too many expenses to each of the businesses. For example: if one of the businesses is allocated too much money for advertising, the other business may suffer because it would not have enough money in its budget to advertise properly and effectively.

Also, if a business is allocated too little expenses, the business could lose out on certain business ventures that may benefit the company and yield a