Calculation Of Traditional Costing Method Accounting Essay

Calculation Of Traditional Costing Method Accounting Essay The objective of doing this Cost Accounting Assignment is to understand how to do a proper calculation of traditional costing method and the Activity-based Costing. It is important to have this basic practice to help us in the experience of doing this calculation while we are studying other topic. Through the process of calculation of both methods, I have done by given the history of both method, the definition of both method, and the explanation of both methods. Other than that, I also have given the differences of the traditional costing method and activity-based costing. I also have given the advantages and disadvantages of both methods. This calculation is for understand total profit of ScooterDrivers product. And discuss the implication of activity-based costing for the director. TABLE OF CONTENT PAGE NO. 1. EXECUTIVE SUMMARY 1 2. QUESTION 1 Calculation total profit Absorption costing Activity-based costing Report Evaluate absorption costing and activity-based costing Implication of activity-based costing 3-4 4-5 6-12 12-14 3. QUESTION 2 15-24 4. REFERENCES 25-26 QUESTION 1 Calculate the total profit on each ScooterDrivers three types of product using each of the following methods to attribute overheads Absorption costing OAR = Budgeted production overhead Budgeted activity level OAR = RM2,400 000+RM6,000 000+RM3,600 000 200 000 + 220 000 + 80 000(direct labour hours) = RM12, 000 000 500 000(direct labour hours) = RM 24 per direct labour hours Product cost per unit RisingStar(RM) RoadRider(RM) FireRoll(RM) Direct material 400 600 900 Direct labour (RM5ÃÆ'-100hrs) 500 (RM5ÃÆ'-137.5hrs) 687.50 (RM5ÃÆ'-200hrs)1000 Prime cost 900 1287.50 1900 (+)Production (RM24ÃÆ'-100) 2400 (RM24ÃÆ'-137.5hrs)3300 (RM24ÃÆ'-200hrs) 4800 Overhead Production cost per unit 3300 4587.50 6700 Profit RisingStar(RM) RoadRider(RM) FireRoll(RM) Total(RM) Selling Price per unit 4000 6000 8000 (-) Production costs (3300) (4587.50) (6700) Profit per unit 700 1412.50 1300 (ÃÆ'-)Output Unit 2000 1600 400 Profit 1,400 000 2,260 000 520 000 4,180 000 Activity based costing OAR = Budgeted production overhead Budgeted activity level Deliveries to retailer = RM2,400 000 250 (100+80+70) = RM 9600 per deliveries to retailers Set- up costs = RM 6,000 000 100(35+40+25) = RM60000 per set up Purchase orders = RM 3, 600 000 800(400+300+100) = RM 4500 per purchase order Product cost per unit RisingStar(RM) RoadRider(RM) FireRoll(RM) Direct material 400 600 900 Direct labour (RM5ÃÆ'-100hrs) 500 (RM5ÃÆ'-137.5hrs) 687.50 (RM5ÃÆ'-200hrs) 1000 Prime cost 900 1287.50 1900 Production overhead [ Deliveries to retailers 480 480 1680 [ [ Set up costs 1050 1500 3750 [ [ [ Purchase order 900 843.75 1125 Production cost per unit 3330 4111.25 8455 Profit RisingStar(RM) RoadRider(RM) FireRoll(RM) Total(RM) Selling Price per unit 4000 6000 8000 (-) Production costs (3330) (4111.25) (8455) Profit per unit 670 1888.75 (455) (ÃÆ'-)Output Unit 2000 1600 400 Profit 1,340 000 3,022 000 (182 000) 4,180 000 To : ScooterDrivers director From : Management Accountant Evaluate the labour hour and the activity-based costing methods in the circumstances of ScooterDriver. ABSORPTION COSTING METHOD During the most of the 1900s, almost all companies used traditional costing systems that those do not accumulate or report costs of activities or processes (Anderson, 1995). Traditional absorption costing methods attribute production overheads to units of output without attempting to allocate administration, selling or distribution overheads and many activities are not directly related to production volume(e.g. ordering, delivery, transportation, equipment set-up, machining and administration) (Miller and Vollman, 1985). These require non-volume based cost drivers if costs are to be appropriately traced and provide the motivation for the development of activity based costing (ABC) systems(Hilton, 1994). Direct material and direct labour costs can be easily be traced to jobs and processes, but manufacturing overhead may bear no obvious relationship to individual units of product and assignment of overhead made through a volume-based activity base (or cost driver), attempt to ensure that products which cause large amounts of overheads costs correspond with those which require large amounts of the cost driver (Sizer, 1989). The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labour hours or production machine hours(Sizer, 1989). As manufacturing becomes more sophisticated the manufacturing overhead costs usually increase while the direct labour hours or production machine hours decrease therefore, the direct labour or machine hours are unlikely to be the root cause of the manufacturing overhead(Hilton, 1994).   ABC (ACTIVITY-BASED COSTING) ABC (Activity-Based Costing) arise in the 1980s from the increasing lack of relevance of traditional cost accounting methods (Weetman,2006). The traditional cost accounting methods were designed around 1870 1920 and in those days industry was labor intensive, there was no automation, the product variety was small and the overhead costs in companies were generally very low compared to today, from the 1960s particularly 1980s this changed rapidly (Whitehead and Upson, 1982). For these reasons, and more, traditional cost accounting has been called everything from number 1 enemy of production and questions whether it is an asset or a liability have been raised (Innes and Mitchell, 1998). ABC has been promoted by Johnson(1988), Kaplan(1988) and Cooper (1988), among others, as a means of improving the quality of management accounting information when traditional methods of allocation overhead costs might be misleading to the users of product cost information (Smith, 1995). Harvard Business School Professor Robert S. Kaplan was an early advocate of the ABC system, while mainly used for private businesses, ABC has recently been used in public forums, such as those that measure government efficiency (Cooper, 1990). ABC recognizes that many significant overheads are related to activities which are independent of volume and identifies those cost drivers which consume resources to determine process and product costs (Innes and Mitchell, 1998). ABC is an alternative to traditional accounting where business overhead (indirect costs such as lighting, heating, and marketing) provided in the percentage of direct costs of the activities but this is not satisfactory because the two activities that absorb the costs are directly can use very different amounts of overhead (Izhar, 1990). An industrial robot is a large scale, for example, can use the same amount of labour and materials as a robot. But the specific robot uses far more time (overhead) engineers from a mass production company (Johnson and Kaplan, 1987). ABC is an accounting method that allows businesses to gather data about their operating costs and they are assigned to specific activities such as planning, engineering, or manufacturing and then the activities are associated with different products or services (Jones and Dugdale, 2002). In this way, the ABC method enables a business to decide which products, services, and resources are increasing their profitability, and which are contributing to losses (Johnson and Kaplan, 1987). Managers are then able to generate data to create a better budget and gain a greater overall understanding of the expenses that are required to keep the company running smoothly (Izhar, 1990). Generally, activity-based costing is most effective when used over a long period of time, as opposed to shorter-term solutions such as the theory of constraints (Smith, 1995). ABC is a method of allocating costs to products and services (Izhar, 1990). It is generally used as a tool for planning and control and it was developed as an approach to address problems associated with traditional cost management systems that tend to have the inability to accurately determine actual production and service costs, or provide useful information for operating decisions (Hopper, Northcott and Scapens, 2007). With these defiencies managers can be exposed to making decisions based on inaccurate data. The higher exposure is for companies with multiple products or services (Innes and Mitchell, 1998).   DIFFERENCES BETWEEN TRADITIONAL AND ABC SYSTEMS There is a basic philosophical difference between the traditional and the ABC approaches. Traditionally sees overheads as rending a service to cost units, the cost of which must be charged to those units (Atrill and Laney, 2007). ABC sees overheads as being caused by activities, and so it is the cost units that cause the activities that must be charged with the cost cause (Drury, 2005). It is not always easy to see how and why some overheads costs have arisen (Atrill and Laney, 2007). This has traditionally made them more difficult to control that direct labour and materials costs, if, however an analysis of overheads can identify the cost drivers, question can be asked about whether the activity driving certain costs is necessary at all, and whether the cost justifies the benefit (Warren, Reeve and Fess, 2005). Adopting ABC requires that most overheads can be analysed and the cost drivers identified (Drury, 2005). This means that it might be possible to gain much cleaner insights about the overheads costs that are caused, activity by activity, so that fairer and more accurate product costs can be identified, and costs can be controlled more effectively (Warren, Reeve and Fess, 2005). Under ABC, an overheads cost pool is established for each cost driver in which all of the costs caused by that driver are placed (Atrill and Laney, 2007). All costs associated with this activity would be allocated to that cost pool and the total costs in that pool would then be allocated to output, using the cost driver identified, according to the extent to which each unit of output drove those costs (Warren, Reeve and Fess, 2005). Allocating overheads costs to cost pools, as is necessary with ABC, contrasts with the traditional approach, where the overheads are normally allocated to production departments (cost centers) (Atrill and Laney, 2007). In both cases, however, the overheads are then charged to cost units (goods or service) (Drury, 2005). With the traditional approach, overheads are apportioned to product departments (cost centers) (Dyson, 2007). Each department would then derive an overhead recovery rate, typically overheads per direct labour hour (Weetman, 2006). Overheads would then be applied to units of output according to how many direct labour hours were worked on them (Abraham, Glynn, Murphy and Wilkinson, 2008). With ABC, the overheads are analysed into cost pools, with one cost pool for each cost driver (Drury, 2005). The overheads are then charged to units of output, through activity cost driver rates, and these rates are an attempt to represent the extent to which each particular cost unit is believed to cause the particular part of the overheads (Abraham, Glynn, Murphy and Wilkinson, 2008). ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING AND ABC ABSORPTION COSTING ADVANTAGES DISADVANTAGES It assumes all the costs that contribute to the final product in some way(Atrill and Laney, 2007). This includes both direct costs and indirect costs(Atrill and Laney, 2007). Direct costs refer to the costs that can be detected directly to the product itself, such as direct materials or direct labor(Atrill and Laney, 2007). Indirect costs refer to costs which cannot be detected directly to the products and allocated to products, such as property taxes or factory manager wage(Atrill and Laney, 2007). A disadvantage of absorption costing involves pricing decisions(Drury, 2005). When a company has excess capacity and it considers various business opportunities, it may deny business that would generate profits for the company(Drury, 2005). The company evaluates each business opportunity using absorption costing as its base cost(Drury, 2005). The company accepts business opportunities that provide revenue above the absorption cost and rejects business opportunities that provide revenue below the absorption cost(Drury, 2005). Some of the business that the company rejects may contribute additional profits to the company when it has excess capacity (Drury,2005). Generally accepted accounting principles (GAAP) represents the standard that most corporations pursue for financial reporting(Johnson and Kaplan, 1987). Generally accepted accounting principles need corporations to use absorption costing for external reporting(Johnson and Kaplan, 1987). Companies that use different forms of product costing for internal analysis is still necessary to maintain a system of absorption costing to GAAP(Johnson and Kaplan, 1987). Companies that use absorption costing for all the valuable products have the advantage that the cost of the same can be used for all purposes(Johnson and Kaplan, 1987). Another disadvantage of absorption costing involves skewing the results of decisions made to discontinue business segments(Izhar, 1990). When the company uses absorption costing in the decision, the analysis includes fixed costs that will remain whether the company eliminates the segment or not(Izhar, 1990). Absorption costing identify fixed costs in the cost of the product(Izhar, 1990). Because it is suitable to determine the price of the product(Izhar, 1990). Pricing based on absorption costing ensure that all costs are covered. (Izhar, 1990) Absorption costing does not help in cost control and planning and control functions(Johnson and Kaplan, 1987). It is not useful in determining the responsibility for the occurrence of cost(Johnson and Kaplan, 1987). It is not practical to hold the manager responsible for the cost of which he / she does not control(Johnson and Kaplan, 1987). Absorption costing will show the proper calculation of the profit of variable costing in situations where production is carried out to have a sale in the future (e.g., seasonal production and seasonal sales) (Izhar, 1990). Some costs can be removed from the product during the income statement for the inventory issue(Johnson and Kaplan, 1987). Therefore, managers evaluated on operating income can temporarily increase profit by increasing production(Johnson and Kaplan, 1987). . ACTIVITY-BASED COSTING ADVANTAGES DISADVANTAGES The advantage of activity-based costing is the accuracy in the process of costing with regards to the product line, the end-users of the product, the stock-keeping units employed by the management and the channel and category which streamline the flow of the product from the producer to the end user(Dyson, 2007). The process of data collection for this system is very time consuming(Smith, 1995). This system helps in the process of better understanding the concept of resource allocation overhead costs business as common as they used by specific product line and their relationship to specific cost drivers(Dyson, 2007). The system is so transparent that some managers will not approve because they want to keep a few things from the viewpoint of owners(Smith,1995). This process is for   cost of unitary, or the marginal cost calculations based on the contrast with the traditional method of cost accounting that uses the total cost(Dyson, 2007). Capital expenditure on systems based on the following activities and running costs can be a road block for the firm(Smith, 1995). The system is easy to understand and interpret it can be accessed, use and functional implemented throughout all forms of business set-up(Dyson, 2007). The system helps in the process of benchmarking which is part of the quality control system(Dyson, 2007). The system works very well will increase the quality and up gradation program(Dyson, 2007). The implication of activity based costing The finance director argued that I very much doubt whether selling FireRoll is viable but I am not convinced that activity-based costing would tell us any more than the use of labour hours in assessing the viability of each produt. From my opinion, I not agree with what finance director told because in activity-based costing use cost driver. Cost driver is a factor that can cause a change in the cost of an activity. An activity can have more than one cost driver attached to it. For example, a production activity may have the following associated cost-drivers such as a machine, machine operators, floor space occupied, power consumed, and the quantity of waste and/or rejected output. In ScooterDriver they used three type of cost driver such as deliveries to retailers, set-up costs and purchase orders. So we can see how much each cost driver cost for the product and choose the product fairer and more accurate product costs can be identified, and costs can be controlled more effectively. Other than that, activity-based costing not only using labour hours for assessing the viability of each product, it also use machine hours. The marketing director argued that I am in the process of negotiating a major new contract with a motorcycle rental company for the RisingStar model. For such a big order, they will not pay our normal prices but we need to at least cover our incremental costs. I am not convinced that activity-based costing would achieve this as it merely averages costs for our entire production. From my opinion, I not agree with what marketing director told because activity-based costing shows average cost better than absorption costing. Absorption costing is more simplistic and less accurate than activity-based costing, and typically assigns overhead costs to products based on an arbitrary average rate. Activity-based costing is more complex and more accurate than absorption costing. This method first assigns indirect costs to activities and then assigns the costs to products based on the products usage of the activities. The managing director argued that I believed that activity-based costing would be an improvement but it still has its problems. For instance, if we carry out an activity many times surely we get better at it, and costs fall rather than remain constant. Similarly, some costs are fixed and do not vary either with labour hours or any other cost driver. From my opinion, I not agree with what managing director told because the definition of fixed cost in activity-based costing is a cost element of an activity that does not vary with changes in the volume of cost drivers or activity drivers. For example The deprecation of machine may be direct to a particular activity, but it is fixed with respect to changes in the number of units of the activity driver. Same goes to ScooterDrivers product the cost is fixed over a given time not all time or period. And the designation of fixed cost can also vary depending on the extent which the volume of production , activity drivers or cost drivers may change. The chairman argued that I cannot see the problem. The overall profit for the company is the same no matter which method of allocating overheads we use. It seems to make no differences to me. For my opinion, I agree with what chairman argued that both method gave same profit but from my point of view, I think that activity-based costing more benefit than the absorption costing. The profit of ScooterDriver company is RM4180000. For what I said that activity-based costing more benefit because absorption costing mostly utilizes volume related allocation bases while activity-based costing. uses drivers at various levels. Activity-based costing is a method that allocates a cost to various activities which then enable an organization to make informed decisions regarding products and/or services. Once the costs have been determined, they can be input into computer applications designed to analyze the costs. Management can then modify the budget and help the company become more profitable by decreasing inefficient activities. So activity-based costing is more advantage to a company to make profit. Question 2 Explain how the business environment that businesses face has changed over the past decades and discuss how this has had impact on management accounting. INFORMATION TECHNOLOGY (IT) The so called new media boom of the 1980s failed to live up to expectations because the underlying technologies never became widespread(Drury, 2004). In contrast, technological advances on two fronts which are digitization and networking have become indispensable components of todays society(Drury, 2004). Digitization is enabling the fusion of different media based on technologies for processing and transmitting huge volumes of data(Drury, 2004). Networking is creating virtual communities on networks (cyberspace) centered on the Internet(Drury, 2004). With the advance of technology, electronic networks are revolutionizing structures and processes in the business world(Hilton, 1994). To improve processes, businesses are introducing e-mail and intranets. But of even greater impact is the revolution in business contacts not only with other companies but with consumers. The infrastructure has grown as more consumers use personal computers and participate in networks, and technological advances are making communication more efficient. Whereas information technology in the past mainly focused on changing work processes inside companies, todays revolution in information and communications technology could potentially alter the model of communication between businesses and consumers. In the old economy information communication, and transactions are all physical things(Hilton, 1994). They include cash, stamps, invoices, stock certificates, reports, face to face meetings, analog telephones, radio and television broadcasts, receipts, blueprints, maps, photographs, books, newspapers, magazines, and direct mail advertising. In the new economy, all types of information transactions, and personal communication will increasingly be digitized-that is, compressed into bits, stored in computers and transmitted through networks at the speed of light. The quality of information will be much better than with analog transmission. Today our approach to daily life is centered on physical things(Hilton, 1994). For example, the act of shopping involves a process of going to a store, obtaining information on the desired product, making a purchasing decision, paying money, and receiving the product. With the emergence of mail order shopping, transactions could be carried out simply by exchanging information on a product or service, and credit cards and mail delivery eliminated the need to visit a store and talk to a sales clerk(Hilton, 1994). In other words, information on products and services could be dissociated from and distributed separately from the physical product or service, eliminating time and space restrictions of conventional physical communication. This implies a shift in management resources from land, labor and capital, to information. In the information network society, the conventional conditions for corporate success such as large cities, large markets, and large companies will no longer apply. Companies can operate from anywhere if they are connected to a network, and can plunge right into the global market rather than grow in the local market. Since the most important factor is the value of the information a company possesses, we predict that market entry and competition will intensify as size of capital becomes irrelevant to market entry. Application of IT in management accounting has major impact on the organizations profits. It is wrong to conclude that implementation of new technology in management accounting will improve companys profits. Implementation of new technologies may reduce companys income, as the implementation is costly depending on the technology adopted. There is a risk to the companies that if inappropriate technology is chosen, then the company is forced to incur unnecessary costs which lead to waste of resources. However, if the management and the accountants study the feasibility and the functionality of the systems before the implementation of IT in management accounting, then the above risk can be avoided. The skill and knowledge of accountants should be repositioned to support the application of IT in management accounting. The companies have to send their staff to IT related training to acquire and update their IT skills to use the system efficiently. The users of the system must be trained w ell in order to take advantage of the technology within the system. Selecting user friendly system is essential, as it require less IT skilled personnel to handle the system. Most of the systems available now are user-friendly and easy to use. Technology is changing fast and it is very difficult to keep track with the technology changes. The companys challenge is to adopt a technology that can be used for a long period which may not be achievable now. The new technology today will be obsolete within couple of months and will be replaced by more sophisticated technology. So the company has to select the technology that is upgradeable to meet the future technology requirement. GLOBALIZATION Globalization means  the reduction of the difference between one economy and another  so that trade within and between different countries is increasingly similar all over the world. Globalization has become a big buzz word in the last 10/15 years, but it has been going on for centuries, and especially since 1945. In the 17th Century new ship design allowed Europeans to start trading with the rest of the world in a much bigger way, although trade was still a tiny part of the economy compared to agriculture. Later developments in transport, steam ships, the railways and now aircraft, have all contributed to the development of trade. Aircraft also move people around quickly, so the sense of the size and distances of the world shrinks making us feel that far-away places are no longer so strange. The internet now allows international communication in a way that was not possible before; your favourite site could just as easily be in New Zealand as in London. The following main factors have fuelled the pace of globalization which are first is technological change, especially in communications technology.  For example, UK businesses and data by satellite to India (taking advantage of the difference in time zones) where skilled but cheaper data handlers input the data and return it by satellite for the start of the UK working day. Second is transport is much cheaper and faster.  This is not just aircraft, but also ships. The development of containerization in the 1950s was a major breakthrough in goods handling, and there have been continuing improvements to shipping technology since then. Third is removal of capital exchange controls.  The movement of money from one country to another was also controlled, and these controls were lifted over the same period. This allowed businesses to move money from one country to another in a search for better business returns; if investment in ones own country looked unattractive, a business could buy businesses in another country. During the 1990s huge sums of money, mainly from the US, have come into the UK economy. There are three impact of globalization on management accounting. First, management accounting deals with both financial and non-financial data to support a wide range of managerial decisions in contrast to financial accountings focus solely on financial data to support investors and creditors capital allocation decisions. For many companies, notes CareerBank.com CFO Douglas Banister, the real value-add is the integration of financial reporting with operational information. Second, management accounting looks forward as well as backward, whereas financial accounting is oriented solely towards history. Management accounting involves anticipating what will, could, or should happen, as well as figuring out what did happen. Forecasting, planning, and budgeting are typical management accounting activities. Third, management accounting looks outward as well as inward, whereas financial accounting is focused solely on what happens internally within an enterprise. Management accounting involves proactively seeking and identifying opportunities and threats that an enterprise faces from customers, competitors, suppliers, regulatory agencies, and other external parties. In short, management accounting is focused on enhancing business performance in a competitive environment, not simply on ensuring compliance with standards and regulations. MANUFACTURING ENVIRONMENT New manufacturing strategy commonly involves the use of new technologies, and changes in organizational structure and management practices, such as Just-in-Time (JIT) and Total Quality Management (TQM) that possible lead to a radical change in the way business is conducted. AMT applications include applications such as computer integrated manufacturing (CIM), computer-aided design (CAD), computer-aided engineering (CAE), flexible man

Ecological Theory and Beautification Essay

The ecological theory in criminology maintains that the physical environment where people are situated influences certain human behaviors. The theory has its scientific advantages and disadvantages when compared to the process of â€Å"beautification,† which is the process of visually improving a city or town specifically one that is situated in an urban area. For the most part, the assertions of the ecological theory are not significantly dependent on the dominant ethnic group living in a particular area, thereby suggesting that the findings of the theory do not depend on subjective human relations but rather on the physical environment where they are located. It has a scientific advantage in the sense that it avoids the problems brought about by the relative circumstances of exactly who are living within the area. On the other hand, its disadvantage is that its findings—high crime rates with respect to social disorganization—can fluctuate between being a cause or an effect. In a sense, high crime rates can result to social disorganization and, similarly, social disorganization can lead to high crime rates. Relying on the physical environment in interpreting human behaviors is also problematic because doing so does not explain why some people in such areas commit certain crimes while others in the same areas do not. Beautification, however, is a relatively more stable theory than the ecological theory because, for example, urban beautification schemes through evictions are meant to address high crime rates and not the other way around. The ecological theory puts great emphasis on the fact of living within certain zones in an area as a primary reason for certain rates of crime. An earlier study conducted by Shaw and McKay (2006) in 1942 suggests that the Zone 2 of an area contain more crime rates than any of the other zones primarily because this zone does not have a settled community to begin with which, in effect, prevents the institutionalization of clear moral guidelines. In effect, the study in particular and the theory in general indicate that, regardless of those who settled in any of these zones, the behavior of the settlers as well as the rate of crime will have to depend on the corresponding zones. This argument is particularly interesting because it leaves the interpretation of human behavior on the physical environment instead on the people under study. According to Lowman (1986), there is the tendency to make unjust selections in using â€Å"criminological theory in developing geographic perspectives on crime† (p. 81). If that is the case, ecological theory as applied to criminology faces the greatest disadvantage—the disadvantage of arriving at biased results. Worse, the distinction between the causes and the effects of criminal activities may become blurred due to the tendency to not become objective. High crime rate can become a flexible factor, becoming a cause on one hand with social disorganization as its effect and becoming an effect on one hand with social disorganization as its cause on another. In fact, a separate study finds that there is no necessary connection between social class and crime and that more is yet to be understood in these two distinct concepts (Tittle, 1983). From the perspective of ecological theory, areas are divided into zones and these zones are occupied by more or less the same people in terms of social class, hence social stratification in the physical environment. If there is no apparent connection between social class and the types of crimes committed by people in any of the prevailing social classes, there remains the difficulty of further asserting that there is an apparent link between the physical environment and the rate of crimes in the different zones. Thus, the main disadvantage of using ecological theory in interpreting human behavior within the confines of certain zones is that it uses a shaky foundation. More specifically, the theory does not address the inconsistencies between those who commit certain crimes within a specific zone from those who do not commit any crime at all. The main question is: why do some people in Zone 2 commit theft, for instance, while some others do not? It appears that the physical environment does not hold a firm solution to the task of explaining human behavior. Nevertheless, another study reaffirms the assertion of the ecological theory. In a study conducted by Tita, Cohen and Engberg (2005), it was found out that small gangs operate within select areas especially in urban slum locations, suggesting that in some cases the ecological theory may hold true. In order to address the problem, it may be argued that urban beautification be taken into consideration such as demolishing structures in slum areas and replacing them with visually pleasing structures. The advantage of adopting this measure is that it can literally remove the physical environment where these small gangs thrive. As a result, a portion of the area is altered and cleansed, in a manner of speaking, which is a faster solution than the possible solutions that can be taken from the ecological theory. A disadvantage of applying the ecological theory in providing a solution to the problem of small gangs is that it requires sufficient time and firm policies. For instance, the ecological theory may suggest that the income in these slum areas should be raised through specialized government programs and the law enforcement be made more stringent. While the solutions taken from the ecological theory are certainly needed, they call for serious implementation and consistent follow-up on their development. On the other hand, the disadvantage of adopting the beautification solution through eviction is that it raises ethical concerns. It is a quick fix that carries several moral consequences, chief of them humanitarian reasons. Both the ecological theory and the process of beautification have their corresponding advantages and disadvantages. The challenge is not to find which one is generally better than the other but to determine which one applies best to a particular instance. Certain objections may be raised against either approaches, but they nevertheless remain significant methods in understanding certain types of human behavior such as criminal activities. References Lowman, J. (1986). Conceptual Issues in the Geography of Crime: Toward a Geography of Social Control. Annals of the Association of American Geographers, 76(1), 81-94. Shaw, C. R. , & McKay, H. D. (2006). Juvenile Delinquency and Urban Areas: A Study of Rates of Delinquents in Relation to Differential Characteristics of Local Communities in American Cities. Oxfordshire: Taylor & Francis. Tita, G. E. , Cohen, J. , & Engberg, J. (2005). An Ecological Study of the Location of Gang â€Å"Set Space†. Social Problems, 52(2), 272-299. Tittle, C. R. (1983). Social Class and Criminal Behavior: A Critique of the Theoretical Foundation. Social Forces, 62(2), 334-358.

Netflix: A Case Analysis Essay

Netflix offers a variety of product services to its customers. The company offers traditional DVD rental by mail, instant streaming of DVD content through home PCS, and streaming on Netflix-ready devices that could be hooked up to one’s TV. Netflix has a subscription based model, which allows customers to utilize their products/services through a per month fee rather than a pay as you go rate. Although the company offers eight different subscription packages, it derives its largest revenues from its $8.99, $13.99, and $16.99 subscription plans that include unlimited DVDs per month, 1-3 titles out at one time, plus unlimited streaming of online content. The Netflix Strategy Netflix’s strategy so far has been to focus on not just one or two aspects of their customer base, but to focus themselves in a number of directions in order to build upon and capitalize on a growing subscriber base. Their main strategy has been to build and maintain the most comprehensive selection of DVD titles in the industry, and they have done so by creating mutually beneficial relationships with a number of entertainment video providers. Their second main strategy has been focused on product differentiation- not only how customers receive content and consume it, but also how customers choose what to watch. Netflix’s number one competitive advantage is their unique software that takes what a customer has seen or rated, and based upon that information builds a list of suggested titles similar to ones they have just watched. While other companies like Blockbuster had begun to leak into the rent-by-mail niche category that Netflix had started, no other company had cus tomer profiling software quite like Netflix. U.S. Movie, TV, & Video Game Rental Market (2006-2009) Consumer Movie Rental Market Revenue ($ million) 2006 2007 2008 2009 In-store Rentals $7,030 $6,215 $5,674 $5,118 Vending Machine Rentals 79 198 486 917 By Mail Rentals 1,291 1,797 1,949 2,114 VOD (cable, digital, & subscription) 993 1,077 1,365 1,684 Between 2006 and 2009, the film rental market underwent a major shift. The in-store rental market declined by nearly $2 million, while vending machine rentals increased tenfold and by-mail rentals nearly doubled. However, VOD services through cable, digital, and subscription also saw major increases. All of these changes meant companies like Blockbuster and Movie Gallery had to either reorganize and make a complete business model shift- or face bankruptcy. Meanwhile, the increases in by-mail rentals and VOD subscription, two services that Netflix offered, meant that the number of Netflix subscribers more than doubled in that same time frame. Purchase decisions from customers were focused on convenient access, price, variety of DVD offerings, ease of return/return fees. Therefore, the key success factors within the U.S. DVD rental industry were quickly becoming: 1) A variety of distribution channels (mail, online streaming, streaming to TV, vending machine, etc) 2) Superior video libr aries (including new releases,  classics, hard to find) 3) Little to no fees associated with renting or returning DVDs 4) Ease of use (in terms of returning) 5) A strong network of entertainment video providers, i.e. suppliers Customers like variety; a video rental store that only stocks the newest releases will not appeal to all markets. Increasingly, customers are becoming more nostalgic in their movie preferences, searching for titles long past premiere. Customers have also become increasingly busy, often not having the time to go to a store to pick out a movie or remembering to return their rentals on time. We live in a world of instant gratification, where being able to click a few buttons and watch the latest Jennifer Aniston rom-com or an old cult classic like Rocky Horror is extremely important. Customers also do not like fees. More and more companies today are offering free shipping/return shipping, and the same is true in the DVD rental industry. Five Forces Analysis of the Industry Rivalry among competing sellers: High. Buyer costs of switching brands is low and product offerings are weakly differentiated. The number of competitors is growing and rivals have diverse strategies for providing their services. Competitive pressure from buyer bargaining power: Medium to high. The cost of switching to competing products is low, as well as the level of convenience for switching. Products are for the most part undifferentiated. Competitive pressure from supplier bargaining power: Low to medium. There are a large number of suppliers within the industry and a variety of ways in with to gain access to the needed material. However, most sellers cannot self-manufacture these movie titles; whereas the suppliers could easily begin offering these services themselves. Competitive pressure from substitute products: Low. The cost per DVD to buy is greater than that to rent or stream a movie. Buyer demand for purchasing DVDs is decreasing due to the lack of disposable income creat ed by the financial crisis, as well as the practicality of owning a vast collection of physical DVDs. Potential of new entrants: High. The market is growing at an ever increasing pace and barriers to entry are low. Buyer demand continues to increase as well, and existing industry members are looking to expand their market reach. (See Appendix 1 for a visual representation). There are a number of drivers of  change affecting the movie retail industry. As mentioned previously, there has been a shift in consumer’s willingness to go out of their way for certain products or services. The consumer climate has shifted to an instant gratification model, in which if acquiring a movie to watch requires more effort than clicking a few buttons, then it is no longer worth the consumer’s time. This force is somewhat unfavorable in terms of competitive intensity because it will drives firms within the industry to compete in a never ending sprint to offer the most titles in the shortest amount of time, which will eventually hit its peak and taper off. However, this force will also positively impact future industry profitability since the more streamlined the process becomes, the more users and more uses the industry will gain. Another force driving change is the switch from buying physical DVDs and acquiring movie collections to accessing them online as needed. This saves consumers valuable time and money, and they no longer need to worry about keeping their DVDs in good condition. This force will positively affect future industry profitability because it will reduce the number of distribution plants needed to sustain video libraries, thus significantly reducing operating costs. Not having to stock multiple copies of millions of DVDS will mean that companies will no longer have to spend money on: Multiple large plants Staffing said plants with a large labor force Operating said plants in terms of rent, utilities, etc Postage (in terms of Netflix specifically) DVD maintenance Mailing and location software One more force that is affecting the movie rental industry is the introduction and proliferation of VOD services offered directly from cable networks and providers. Barriers to entry for these already existing firms is extremely low, and if all networks chose to offer these services, a large portion of profits would be cannibalized from outside companies such as Netflix or Hulu. This force will negatively affect competitive intensity, but positively affect future industry profitability. If the large supplier companies (cable networks & providers) all started offering their own VOD, competition from smaller independent renting firms would disappear. Yet  profitability would increase due to the ease of access to entire network libraries. Mapping the Movie Retail Industry The competitive characteristics that differentiate firms within the movie retail industry are as follows: Use of distribution channels Product line breadth Price Geographic coverage Ease of access/use In conducting my analysis of the strategic positioning of firms within this industry, I chose to focus on price and use of distribution channels (See Appendix 2). Netflix and VOD providers are positioned most favorably on the map because both offer moderately priced subscription packages for access to a comprehensive list of movie and TV show offerings using a variety of distribution channels. Netflix is positioned most favorably due to its relative low cost compared to the variety of products it offers access to. Redbox is priced well, but it only offers one method of distribution. Whereas Blockbuster is priced higher than average, but has begun to offer streaming and mail rental options in addition to in store rentals. A Financial Analysis of Netflix Overall, Netflix has fared fairly well over the past several years, even surviving the financial crisis. They continue to generate a profit, and their revenue has grown at a steady rate indicative of the growth of the mail rental & online streaming movie retail market. The company has been growing at an average rate of 20% over the last four years. However, from 2007 to 2008, Netflix only grew at a rate of 13.22%. This noticeable fluctuation in their growth rate can most likely be contributed to the financial crisis that swept the nation during that year. Aside from that dip, Netflix can be expected to continue to grow at a rate indicative of the continued growth of mail and digital movie rental industry. Product costs for Netflix have remained relatively stable over the last four years at over 60% of revenue, fluctuating only by 4% or less. This is  despite the fact that revenues for the company have been steadily increasing. This clearly shows an inability to control manufacturing & operating costs. As Netflix expands, so does its physical DVD inventory and size/number of distribution plants. Although one of their strategies is transition subscribers to streaming delivery as opposed to mail delivery, it is obvious that they have yet to be truly successful in that endeavor. Netflix’s ROA hit an all-time high of 17.05% in 2009, which is somewhat surprising given that the company is deriving most of its revenues from a nubile market. The mail and digital movie rental industry is still growing, so to have an ROA that high is quite an accomplishment. It is clear that the company’s investments in new assets are succeeding in generating returns. (See Appendix 3 for a complete financial analysis of Netflix from 2006-2009). SWOT Analysis of Netflix’s Standing within the Market Strengths Opportunities Netflix cornered the market on direct mail renting before anyone else offered it Has a wide geographic coverage and the fastest turnaround rate Known for its 1 month free trials The brand has a following across a wide variety of consumer segments Their strong relationship with a large network of entertainment video providers Top management realizes the importance/emergence of the digital environment and is trying to shift subscriber use accordingly Netflix has developed unique and comprehensive movie selection software that customizes the consumer experience by capitalizing on their movie tastes and making accurate suggestions Netflix offers the most detailed movie information including customer reviews, critic reviews, etc The increasing demand for digital streaming is clearly an opportunity The shift from by mail rental to digital streaming gives Netflix an opportunity to restructure its subscription packages and price them even more competitively The firm can look at joining forces with some of the networks that are beginning to offer VOD streaming Weaknesses Threats Netflix is a market leader in by mail rental, which has now capped off and started to become a declining category The company’s comprehensive DVD libraries and distribution centers are eating up a large chunk of their revenues Unlike other movie rental/streaming companies, Netflix does not offer access to newly released films Changing subscriber preference towards online streaming will affect Netflix’s current portfolio mix The increasing intensity of competition from other companies, such as Hulu with their Hulu Plus program will eat into Netflix’s consumer base Increasing number of networks that are beginning to offer free streaming of content on their websites For the moment, Netflix’s overall situation is fairly attractive. Being the first company to introduce a new niche in a market is a huge asset. A company cannot simply ‘buy’ cornering the market on a good or service. Since Netflix already offers unlimited direct streaming, that puts it ahead of some of its competitors. However, Netflix will need to restructure and reevaluate the profitability of its by mail rental service in the near future. Compared with Blockbuster and VOD Providers, Netflix has the highest level of competitive strength at 46 points. Netflix by far has the most comprehensive number of products and distribution channels, given that consumers can either rent DVDs by mail or stream them on their PC or TV. The number of distribution channels factors into the company’s ease of use, as does the fact that their DVDs come with prepaid return envelopes. VOD Providers are a similar ease of use to Netflix given that consumers can just click a few buttons on the TV and instantly be watching their chosen film. Blockbuster is ranked lowest in terms of price & fees because their prices are based on a per DVD cost, and when sales began to decrease, the company increased its prices. Not to mention that there are late fees associated with renting, whereas with Netflix you can keep a DVD for as long as you like without incurring fees. Blockbuster also scores lower in terms of the number of products because their l ibrary is limited by store space, whereas Netflix and VOD Providers can have a virtually unlimited library of titles spanning the entire duration of the movie industry. Performance Concerns Overall, Netflix’s performance is quite satisfactory. The company persevered through the financial crisis and has managed to hold on to market majority despite growing competition from rival firms. a) My main concern for Netflix is the amount of revenue that is currently being eaten up by product costs. Despite steadily increasing revenues, Netflix’s COGS continues to take up more than 60% of said revenue. In the coming years when the market shifts entirely to direct streaming, Netflix will be left with millions of  DVDs and operating costs associated with the large distribution centers required to house these DVDs. If the company takes too long to phase out this aspect of its product/service portfolio, it could lose out on major profits and potentially wind up in debt. b) A second issue I see for Netflix is that more and more companies are beginning to offer streaming of their own content either for free to the public, or free to subscribers of certain cable companie s. Since Netflix has a cost associated with it, its customer base could be cannibalized by these new entrants. Recommendations a) Given that by mail renting is on the decline, Netflix should work quickly to phase out this service from its current offerings. Right now there are still companies out there willing to take on extensive DVD libraries- five or so years from now, that may not be the case and Netflix will have lost out on an opportunity to avoid a significant loss. b) Netflix needs to look at restructuring and re-pricing their current subscription packages. The number of packages and their prices that the company offers are no longer relevant to demand. With more and more entrants into the market, Netflix is losing its competitive pricing advantage. In sum, in order to remain competitive Netflix needs to restructure both its product offerings and pricing strategy. The company should be looking ahead to see what the next big thing in movie rental/streaming will be and capitalize on that, while other firms are still entering the market and developing what Netflix already has.

Pharmacotherapy Treatment Of Alzheimer s - 1541 Words

604301973 Pharmacotherapy Treatment of Alzheimer’s: Donepezil A disease that sweeps across the nation and affects nearly 80% of the population ages 60 and up is known as Alzheimer’s. A misconception that many people believe about Alzheimer’s is that it is a part of getting older. It is not true. Alzheimer’s is an intricate neurodegenerative disorder associated with â€Å"protein misfolding and aggregation, oxidative stress, mitochondrial abnormalities and neuroinflammatory process at a molecular level† and â€Å"synaptic loss, cholinergic dysfunction, and abnormal protein depositions in the brain†. Some symptoms associated with this disease are delusion, inability to recall or retain information, mental decline, aggression, personality changes, mood swings, and etc. Though there are currently no cures for Alzheimer’s, cholinesterase inhibitors such as donepezil, galantamine, rivastigmine and NMDA receptor antagonist memantine are used as pharmac otherapy treatment to slow down the progression and temporarily alleviate symptoms. This essay is primarily focused on Donepezil and the cognitive alleviation it results in for patients with Alzheimer’s. The first part of the paper will summarize two preclinical and two clinical trials done on Donepezil to subjects with Alzheimer’s or Alzheimers like symptoms. The second part will describe the implications and future directions from all the results obtained. The first article summarized is â€Å"Donepezil-induced improvement in delayed matchingShow MoreRelatedSymptoms And Progression Of Alzheimer s Disease Essay2254 Words   |  10 Pageswill triple by 2050. Alzheimer s is the most common form of dementia, a general term for memory loss and other intellectual abilities serious enough to interfere with daily life. Alzheimer s disease accounts for 60 to 80 percent of dementia cases. The number of Americans living with Alzheimer s disease is growing and growing fast. An estimated 5.4 million Americans of all ages have Alzheimer s disease in 2016. Of the 5.4 million Americans with Alzheimer s, an estimated 5.2 million peopleRead MoreThe Effects Of Resveratrol And Its Effect On The Risk Of Neurodegeneration, And Alzheimer s Disease1138 Words   |  5 Pagesanti-inflammatory, anti-viral, and anti-cancer properties. Although resveratrol was first isolated in 1940, it was not until the last decade that it was recognised for its potential therapeutic role in reducing the risk of neurodegeneration, and Alzheimer s disease (AD) in particular. AD is the primary cause of progressive dementia. Resveratrol has demonstrated neuroprotective effects in s everal in vitro and in vivo models of AD. Apart from its potent antioxidant and anti-inflammatory roles, evidenceRead MoreMajor Depressive Disorder ( Mdd )2192 Words   |  9 Pagesphysical and mental health problems, such as substance abuse, suicidal ideations and catatonic behaviours. A patient with major depression can be treated using different treatment methods, such as pharmacological, cognitive-behavioral therapy (CBT), group therapy, interpersonal therapy and Electroconvulsive therapy. Each treatment benefits a patient struggling with depression in a different way depending on a patient’s compliance and social support. In this paper, I am going to present ECT as anRead MoreAlzheimers Disease Essay2087 Words   |  9 Pagesfatal dementia, is characterized by progressive cognitive decline. While AD is the most common form of dementia, its prevalence has only recently been recognized. When Alois Alzheimer first described the sequence of changes in 1907, physicians be lieved the disease to be an extremely rare, mid-life condition. It wasn’t until the 1970’s that the same types of changes were shown to occur in both late- and early-onset forms (Cavanaugh et.al. 2008). As such, almost all knowledge of AD has been learned withinRead MoreMicroglial and Neurological Disorder2037 Words   |  9 Pagestransplantation in the treatment of neurodegerative diseases. (ref) Transplanted cell does not act directly through replenishment of loss neuron but via restoration of microglial homeostasis and induced secretion of neurotrophic factors and pro- survival cytokines. (ref) Also, the transplanted cell could be further exploited as vehicle to deliver therapeutics genes to the CNS milieu thus enhanced the treatment outcome and to prevent the progressive of the disease. Apart from management and treatment of neurodegenerative