Value Analysis

By continuously improving the performance of a product / service, its value could be increased thereby leading to reduction of costs. This concept is the base for Value analysis. Value of a product is a relationship between functions it performs and its cost of manufacture. It could be mathematically be expressed as follows: VALUE = […]

Inventory Management – Economic Order Quantity

The primary objective of a good inventory management system is to keep the inventory costs to the minimum. The three major elements of inventory cost are as below: a) Ordering Cost b) Storage Cost (cost of carrying inventory) c) Stock-out Cost (cost of lost sales due to inventory shortages) Several inventory models have been built […]

Relevant Cost and Decision Making – An example

Creative Designing plc a printing company is seeking to increase its business by winning work from new customers. It has received an order from a multinational national company for printing New Year Greeting Cards. The technical team of Creative Designing has given a detailed report on the resource requirement for the order. The total cost […]

Sales Mix Decision with Key factor and multiple constraints

A good problem is the one that helps students understand concepts very well. As requested, I am posting first problem in Decision making process (more problems with solutions will follow). This problem involves finding an optimal sales mix within the given constraints. Though on one side the existence of multiple constraints makes it a challenging […]

CVP Analysis

The objective of a business is to earn and maximize profits. Profit is a relationship between sales and cost which can be mathematically expressed as below: Profit = Selling Price x Quantity Sold – Cost Therefore the key factors that affect the profit of a business are a) Selling price of the products b) Volume […]