Management of Discretionary Costs Essay Example | Topics and Well Written Essays - 3500 words

Management of Discretionary Costs - Essay Example If one is starting with MRP f the product, care should be taken that prices do not include sales tax, and are typically net f distribution expenses. In case f an FMCG product (Fast Moving Consumer Goods) unit realization f the company, which will appear as gross sales will be typically 65% f MRP price which the consumer pays. Many a times, companies give their volume figures under generic product category name. The volume figures include products f different sizes, types and prices. The analyst has to take care f expected changes in product mix while forecasting. Keep a broad picture f the competitive scenario and its impact on pricing. Also, understand key drivers f pricing, like for petrochemicals, India is a price taker, so global price trends have a bigger influence in determining Indian price trends. Material Costs Estimate material costs, which in most cases is the most significant cost item. Key variables - Raw material prices - Production efficiency, conversion norms and yield improvement have a significant bearing on cost estimation. The analyst has to understand the basic manufacturing process and get a fix on input output norms. Labour Costs For estimating labour costs, one can start with previous year's labour cost and adjust it for the following factors. Key variables - Additions/ adjustments for additional capacity/ new plant, - Reduction for retrenchment/ sale f a unit etc, - Salary increases on settlements with union etc. Many companies plan for settlement hikes and make provisions even if negotiations are delayed, - Bonus, profit linked incentives, - Salary increases. Fuel and power cost... Financial challenges faced by Kramer and Associates, and especially by the director of this investment consulting company deal with attempting to manage clients’ portfolios to suit each and everyone’s future financial needs. In summary, the simulation involves three clients with different risk profiles. Adrian O’Donnell has a high-risk growth profile, and wants to see returns as quick as one and a half to two years time. Tonya Davidson has a conservative-risk growth profile, and wants to see a steady growth of her investment over the span of 10 years. John Barrett has a moderate-risk growth profile, and wants to see steady returns over a period of five to six years. The challenge arises on how to allocate their investment funds to meet their desired risk and returns level. With treasury bills, the returns are almost exactly what was promised initially, therefore making them an almost risk-free investment. The returns on T-bills are on average about five percent. Stocks on the other hand, have returns of average 10 percent per year. In this case, companies may eventually experience bankruptcy, which means a depletion of one’s stocks in that company, or that company may experience enormous growth, meaning that the investor will experience enormous returns. Therefore, the simulation challenges the consultant to find the right mix of investment options to satisfy the goals of each client.