Accounting & Bookkeeping & Small Business Forum

[lobuzica]

I would like a few questions answered.

There is a company which is based in Malaysia and produces high quality specialty chemicals.

1. How can disposal of unwanted fixed assets help improve the company's finances and the productivity of the capital employed?

i don't know which of fixed assets are unwanted :/

2.how can the company reduce its cost of capital?

3. The company currently uses a total absorbtion costing approach and is considering introducing activity based costing. What are the benefits of such a system?

Can anybody help me with it????

[benjonusa]

To gain a good understanding of what you are asking will take much more than this forum.

Disposal of unwanted/unused/obsolete fixed assets will free resources for more profit producing activities etc.

In turn this can make the remaining assets more proifitable as the capital employed after disposal is producing the same amount, with less!

Some benefits of ABC:

More accurate costing of products/services, customers, distribution channels
Better understanding of overhead
Utilizes unit cost rather than just total cost
Makes waste visible
Excellent for tracking performance
Enables costing of processes, supply chains, and value streams
Facilitates benchmarking

A good ABC system is not an easy thing to install, but for a lot of companies, it's a good idea. Management accounting is very complex and all new systems need to be researched thoroughly before any changes are made. A new system can affect everything in a company, from office salaries to product price and profitibility. All can make or break a firm.

Ben Jones
www.prodigyaccounting.com

[lobuzica]

one more..I have to answer this question:

"The company is going to write down the value of their stock and certain fixed assets by significant amounts in 20X10. what impact will this have on profits and the return on capital employed?"

this my last question.. i have no idea what the answer is..