After reading Chapters 2, 5, 10, 13, 17 in the Blocher Text, select 2 techniques/concepts of interest to you. Submit a thread of at least 500 words examining the relationship between the selected techniques
After reading Chapters 2, 5, 10, 13, 17 in the Blocher Text, select 2 techniques/concepts of interest to you. Submit a thread of at least 500 words examining the relationship between the selected techniques/concepts and strategic allocation of financial resources with respect to revenues and expenses. Support your thread by citing at least 3 peer-reviewed journal articles. Your thread must be in current APA format and must include a reference list.
Expert Answer and Explanation
Selected Techniques and Strategic Allocation of Finance
Strategic business management involves a series of practices that help a business succeed. These practices include financial mainstreaming and operational management. According to the highlights by Blocher, Stout and Cokins (2010), some of the primary elements of these practices include budgeting and activity based costing.
Budgeting provides a cot-based framework to the business and ensues that the management spends the resources of the business with an objective. On the other hand activity-based costing helps the management evaluate the activities of the business and their financial viability. Accordingly, these two elements of strategic management are closely linked to strategic allocation of finance.
Strategy and Master Budget
Budget is described as a detailed plan for resource mobilization and spending over a given period of time in order to achieve set goals and objectives of the organization (Kaplan and Atkinson, 2015). A budget consists both the financial and non-financial element of planned projects and operations. The budget for a particular period is both a framework for operations and a projection of the operating implications from the budgeted timeline.
Working with the set goals, the business is able to manage the bottle necks and prevent such bottlenecks from hindering the business from achieving the goals of the business. Through strategic budgeting, the management is able to communicate their anticipations throughout the company. An integral set of budget creates a platform for each subunit to see the way the subunits fit into the overall plan for the period that the budget will cover (Kaplan et al.
Activity Based Costing
An approach that changes indirect costs to products on the basis of the units that are produced fails to give accurate figures on product costs and also the incentive for the management of indirect costs; hence, the need for activity based costing. Activity-based costing involves the improvement of the accuracy and determination of costs.
Although the approach is a new feature as far as cost accounting is concerned, it has been widely adopted by different organizations (Margolies and Hoddinott, 2015). Activity-based costing helps the management establish the proportionate number of units produced compared to the investment. Through this approach, the business is able to control its direct and indirect costs (Margolies et al.
Strategic Allocation of Finance
The relationship between the selected techniques and strategic allocation of finance
The process of preparing the budget gives the management insights into the business and anticipated challenges. In this regard, the management is tasked with coming up with strategic approaches that will help the business overcome these challenges. Completion of strategic budgeting and cost allocation for all business units and activities help facilitate the coordination of activities throughout the business.
For example, the budget will show the implications of sales volumes and activity based costing for the budgeting period. Coordination of functional areas of the business is a significant managerial responsibility. Budgeting is a primary business tool that contributes to the achievement of requisite level of coordinated business activities.
Consequently, it gives the management the power and authority to acquire and use resources in the business. A business strategy is an avenue towards attaining the long term goals and their stated goals. The significance of strategy in budgeting and planning cannot be overemphasized. In most cases, businesses perceive budget for the future and as a continuation of the current period with, at best.
Scant attempts to connect the budgeting process to their strategic management. The objective is to develop a budget that achieves the strategic mission and goal of the organization.
Blocher, E. J., Stout, D. E., & Cokins, G. (2010). Cost management: A strategic emphasis. Includes index.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Margolies, A., & Hoddinott, J. (2015). Costing alternative transfer modalities. Journal of Development Effectiveness, 7(1), 1-16.
Which of the following is an example of a theme in a story
A theme in a story is a recurring idea or message that is woven throughout the narrative. Here is an example of a theme in a story:
The theme of love and loss in William Shakespeare’s play, Romeo and Juliet. The story explores the tragic consequences of a forbidden love between two young people from feuding families. The theme of love and loss is expressed through the characters’ passionate love for each other, their willingness to risk everything to be together, and the ultimate tragedy that befalls them.
The theme is expressed through various literary devices such as imagery, symbolism, and dialogue. The story highlights the idea that love can be a powerful force, but it can also lead to loss and tragedy.
Which of the following is not a characteristic of a literary analysis?
A literary analysis is a critical examination of a literary work, such as a novel, poem, or play. Here are some characteristics of a literary analysis:
- Focus on the text: A literary analysis should focus primarily on the text itself, rather than on outside factors such as the author’s biography or historical context. The analysis should examine how literary elements such as plot, setting, characterization, imagery, and symbolism contribute to the meaning and themes of the work.
- Objective analysis: A literary analysis should be objective and avoid personal biases or opinions. The analysis should be based on evidence from the text, such as direct quotes or specific examples.
- Clear thesis statement: A literary analysis should have a clear and specific thesis statement that summarizes the main argument or interpretation of the text.
- Evidence-based analysis: A literary analysis should use specific evidence from the text to support the thesis statement. The analysis should also explain how the evidence supports the thesis and contributes to the overall meaning of the work.
- Attention to literary devices: A literary analysis should pay attention to the literary devices used in the text, such as metaphor, simile, allusion, and foreshadowing. The analysis should explain how these devices contribute to the meaning and themes of the work.
- Interpretation: A literary analysis should provide a thoughtful interpretation of the text, rather than just a summary or plot summary. The analysis should explore multiple interpretations and consider how different literary elements contribute to the overall meaning of the work.
What is an example of a strategic allocation?
Strategic allocation refers to the deliberate allocation of resources, such as capital or personnel, to various areas or projects based on a strategic plan.
Scenario: A Technology Company’s R&D Investment Strategy
Strategic Goal: The technology company aims to maintain its competitiveness by allocating resources to research and development (R&D) projects strategically.
Allocation Categories and Percentages:
- Core Research (40%): The company allocates 40% of its R&D budget to fundamental research. This involves long-term projects that may not have immediate applications but contribute to the company’s intellectual property and future innovation.
- Product Development (30%): 30% of the budget is dedicated to developing new products or improving existing ones. These projects have shorter timeframes and are intended for market launch within 2-3 years.
- Market Research and Analysis (10%): 10% is allocated to market research and competitive analysis to understand consumer needs, market trends, and the competitive landscape. This informs the direction of future R&D efforts.
- Acquisitions and Partnerships (15%): The company allocates 15% of its R&D budget to strategic acquisitions and partnerships with startups or established firms. This helps the company access new technologies and talent.
- Infrastructure and Talent (5%): The remaining 5% is reserved for building and maintaining the necessary infrastructure, such as state-of-the-art labs and hiring top talent in the industry.
In this example, the company’s strategic allocation plan emphasizes long-term innovation (core research), timely product development, market understanding, external collaborations, and the infrastructure and expertise needed to support these efforts. The specific percentages can be adjusted based on the company’s objectives, risk tolerance, and market conditions.
Strategic allocation vs Tactical allocation
Strategic allocation and tactical allocation are two distinct approaches to asset allocation in investment management. Each serves a specific purpose and is associated with different time horizons and objectives.
- Objective: Long-term, focused on achieving overall financial goals.
- Time Horizon: Typically, a strategic allocation plan is established for several years or even decades.
- Diversification: Diversification is based on long-term goals and risk tolerance.
- Rebalancing: Adjustments are made periodically to realign the portfolio with the long-term strategic plan.
Example of Strategic Allocation (Percentages):
- Equities (60%): Long-term investments in stocks, which offer potential for capital growth.
- Fixed Income (30%): Bonds and other fixed-income assets for stability and income generation.
- Alternative Investments (10%): Investments such as real estate, commodities, or private equity to diversify risk.
- Objective: Short to intermediate-term, aimed at exploiting market opportunities.
- Time Horizon: Tactical allocation involves making adjustments in response to market conditions and opportunities, typically over a 6-12 month horizon.
- Diversification: Diversification is based on shorter-term market conditions and opportunities.
- Rebalancing: Frequent adjustments are made to seize tactical opportunities or manage risk.
Example of Tactical Allocation (Percentages):
- Equities (Overweight, +5%): The portfolio temporarily increases exposure to stocks during a bull market.
- Fixed Income (Underweight, -10%): Reduces bond exposure in anticipation of rising interest rates.
- Cash (Overweight, +5%): Increases cash holdings in anticipation of a market downturn.
- Commodities (Neutral, 0%): No change, as the tactical focus is on equities and fixed income.
In the tactical allocation example, adjustments are made to the portfolio based on short to intermediate-term market conditions. This approach aims to capitalize on market opportunities or manage risks as they arise.
It’s important to note that the specific percentages and asset classes used in both strategic and tactical allocations will vary depending on an individual’s or organization’s financial goals, risk tolerance, and market outlook. Strategic allocation provides a long-term roadmap, while tactical allocation allows for more flexibility and adaptability to changing market conditions.
Both approaches can complement each other within an overall investment strategy.
Activity-Based Costing (ABC): Advantages and Disadvantages
Advantages of Activity-Based Costing (ABC):
- Accurate Cost Allocation:
- Benefit: ABC provides a more accurate method of allocating costs to products or services by considering the specific activities that drive those costs.
- Example: In a manufacturing setting, ABC may allocate machine setup costs based on the actual number of setups required for each product.
- Enhanced Cost Visibility:
- Benefit: ABC improves visibility into the costs associated with various activities, making it easier to identify areas of inefficiency or areas for cost reduction.
- Example: Identifying the cost of order processing activities in a retail business can highlight opportunities for process improvement.
- Better Decision Making:
- Benefit: Managers can make more informed decisions by understanding the true costs of products and services, leading to better pricing strategies and resource allocation.
- Example: ABC helps in deciding whether to discontinue a product line or invest in efficiency improvements.
- Resource Optimization:
- Benefit: ABC allows for a more effective allocation of resources by identifying activities that contribute significantly to costs.
- Example: By understanding the cost drivers, a service organization can focus on improving efficiency in high-impact areas.
- Improved Productivity:
- Benefit: With a detailed understanding of activities and their costs, organizations can identify and eliminate non-value-added activities, leading to increased productivity.
- Example: ABC might reveal redundant steps in a production process that can be streamlined for efficiency.
Disadvantages of Activity-Based Costing (ABC):
- Complexity and Implementation Cost:
- Challenge: Implementing ABC can be resource-intensive and may require significant changes to existing accounting systems.
- Example: The need for specialized software and employee training can increase the overall cost of implementation.
- Subjectivity in Activity Assignment:
- Challenge: Determining the appropriate activities and assigning costs to them can be subjective and may vary among individuals or departments.
- Example: Deciding whether a particular activity is a direct or indirect cost can be a point of contention.
- Data Accuracy Dependency:
- Challenge: ABC relies heavily on accurate and up-to-date data. Inaccurate data can lead to incorrect cost allocations.
- Example: If the time spent on a specific activity is not accurately recorded, the cost allocation for that activity may be flawed.
- Potential for Overhead Allocation:
- Challenge: Overhead costs may still be allocated, albeit more accurately. However, this can lead to an increased perception of complexity.
- Example: Overhead costs, even when accurately allocated, may still be seen as arbitrary by some stakeholders.
- Not Suitable for All Organizations:
- Challenge: ABC is most effective in organizations with diverse products or services and complex processes. It may be overly detailed for smaller or less complex businesses.
- Example: A small retail business with a limited product line may find traditional costing methods more straightforward.
Activity-Based Costing (ABC): Steps
- Identify Activities:
- Identify all activities involved in the production or delivery of a product or service.
- Assign Costs to Activities:
- Determine the costs associated with each identified activity, including direct and indirect costs.
- Identify Cost Drivers:
- Identify the factors that drive the cost of each activity. These are known as cost drivers.
- Assign Costs to Cost Objects:
- Assign the costs of each activity to the specific products, services, or customers that consume those activities.
- Calculate Activity Rates:
- Calculate the activity rates by dividing the total cost of each activity by its corresponding cost driver quantity.
- Allocate Costs to Cost Objects:
- Allocate the costs to cost objects (products, services, or customers) based on the activity rates and the usage of the cost drivers by each cost object.
- Analyze and Interpret Results:
- Analyze the results to gain insights into the true costs of products or services. Use this information for decision-making and performance improvement.