recalculating the plan
“Application of the CVP interconnection accounting model beyond the acceptable and relevant range or over long time periods.”
The CVP interconnection accounting model is a convenient model for making decisions on enterprise management within the acceptable range of the “Volume of production (purchase of goods) driver and its sales” driver. Spreading the logic of the accounting model beyond the acceptable range without changing the revenue function from product sales and the enterprise total cost function is an error, since these functions are non-linear over a wider range of changes in driver values. Continue reading
How does optimal stock management and effective inventory management compare?
Optimal inventory management is SKU inventory management that meets any criterion (rule) of optimality, i.e. the best fit rule. The criterion of optimality consciously or unconsciously selects the subject of management, for example, a specialist in inventory management. Consequently, the correctness or inaccuracy of the choice of inventory management criteria determines the optimality or nonoptimality of their management.
The criterion for optimizing the inventory management of an enterprise should best suit its marketing, production, logistical and financial situation and the highest economic goals of the enterprise. Continue reading
Based on the fact that the highest goals of the company’s business are the optimal increase in net profit, positive net cash flow and increase in the market value of the enterprise, for the product sales department represented in the financial structure of the enterprise the simple marginal profit center model should be installed and used to effectively manage it following key (financial) indicators:
(1) marginal profit (for the center of marginal profit);
(2) a contribution to the coverage of fixed costs of the enterprise (for the center of marginal profits);
(3) revenue from sales of products (for the income center); Continue reading