Introduction
FORD Motor Company is a globally
established automobile firm that deals with the production of a range of
vehicles. The organization has been successfully manufacturing cars that have
been outstanding in the international automobile industry. The company’s
overall success cannot be only analyzed or backed up by its products but can
also be cited on the management concepts that it has put in place. FORD has a
unique management approach where it applies different planning, control and
decision making ideas. In addition, costing mechanisms have also benefited the firm
through effective costing management of both variable and fixed costs. Production
costing methods have ensured that FORD Company has produced effective products
in the market that have revolutionized the automobile industry. Financial
management in the company through the application of various types of budgets
has enabled it to thrive in the automobile business. The essay aims at
outlining the core financial concepts in FORD Motor Company through
illustrating the accounting threshold that it applies in its business
endeavors.
Elements
of Planning, Control, and Decision-Making
Planning, control, and decision-making are
key concepts applied in the accounting world to ensure that there is an
organization of resources. Planning and control offer a schematic analysis of
financial management, while decision-making creates a resourceful guided
financial coordination process with an effective choice. In FORD Company, the
three concepts have been largely applied to facilitate the institution’s
success.
FORD’s goals have been used as the basic
planning and control mechanisms. The company has a set of goals that guide it
towards climbing up the global automobile ladder. Every production aspect
implemented in the organization has been outlined by its goals. The company’s
goals are set through a collective meeting where its shareholders play a role
towards every goal determination. The objectives of the organization form the
strategic plan which is a critical element of planning to it (Baker, 2015).
Therefore, the company’s goals have been a great point of planning and control
that have made FORD focus on quality production of vehicles.
The firm’s managers have also been not
only a core element of planning and control, but they have also been effective
elements of decision making. Managers in the company are employed to enhance
effective management of the company. Planning and control have been a function
of the managers that has ensured that the company remains abreast in their
plans. The managers also create an effective environment that makes sure the
company’s objectives and strategic policies are implemented. The managers have
also been a great element of decision making where they make sensitive
decisions in the process of the company’s plans implementation (Baker, 2015).
Although the managers have been blamed for the mistakes that the company has
made in production, they have greatly helped in ensuring that the company makes
innovative and inventive moves in the automobile industry. The mistakes the
managers have made in the process of decision-making have been blamed on the
application of trial and error method in production. The technique is a great
drawback towards the company’s development, and managers should be mentored not
to use it since it is a poor aspect of planning, control, and decision-making.
Types
of Costing Methods (Fixed and Variable Costs)
Costing methods have enabled the company
to make considerable developments in the automobile industry. The techniques
applied by FORD Company ensure that it receives revenue for its products. The
methods also create a feedback mechanism where its customers give views on the
products that it produces. Both fixed and variable costs are considered within
the costing process of the company.
Process costing is a costing method that
has been greatly used by the company. The firm focuses on production of various
models in large quantities. Models that FORD Company produces are identical,
and one model is an improvement over the previous model. Process costing helps
in enhancing large sales volume for the products and guarantees the company an
assured market (Gregorio & Soares, 2013). The application of process
costing has enabled the firm to make huge sales. For instance, in December
2015, the company was cited to have a large sales volume on its pickup model. A
significant improvement of approximately three percent was registered by the organization
as a result of process costing. Therefore, process costing has reaped great
benefits for the company’s financial development.
Job costing has also been seen in the
company. FORD relies on human resource output for the achievement of its
objectives. Job costing is a great aspect that helps in the motivation of its
human resource department. Every employee in FORD Company plays a significant
role towards the accomplishment of the company’s target production (Patrina,
2014). Therefore, the firm’s labor force has been elemental towards the
production process through their continuous motivation by the company’s job costing
strategy.
Process and job costing have been applied
in both fixed and variable costs determination. Fixed costs on the company
include bills and rent while variable costs include raw materials and
transportation costs. Each of these contributes to the overall production
output. Process costing builds up a costing method where each of the fixed and
variable expenses is elemental in the total costs. Job costing also ensures
that the charges are considered. As a result, both the costing methods have contributed
significantly towards making sure that the company has an economical operating
environment. Therefore, the types of costing methods employed by the company
have been an elemental aspect in its financial progress.
Production
Costing Methods
Production costing methods are crucial for
any firm since they ensure that the company not only gets returns but also gets
value for its products. FORD has applied
for job, process and direct costing as production costing methods.
It has been greatly reported that the
company has applied activity-based costing (ABC) method as a production costing
method. The method has ensured that the company makes value on its sales.
Prices allocated to goods and services using ABC are done using informed
decisions. ABC also ensures that the company receives revenue growth with an
effective streamline of its processes. Any costs that do to add value to the
production process are eliminated thus optimizing the production benefits for
the firm (Gregorio & Soares, 2013). ABC method of production costing has
been hugely appropriate in ensuring that the company’s products remain
significant in the market. Therefore, the ABC production costing method does
not only contribute to value addition in the company’s products but ensures that
it makes persistent developments in the automobile industry.
Types
of Budgets Used
Budgets in any institution are an
elemental aspect of its financial development. A stable company applied various
forms of budgets to enhance financial diversity. FORD Company applies to master
and sales budget types in their financial statements.
The master budget, as the name suggests,
has been used by the company to make huge decisions that involve the future of
the company. It involves a summary sum of sales, purchase, investments and
future expenses. Planning activities that involve future productions have been
made using this type of budget which ensures that the company remains relevant
in the market. On the other hand, sales budget type has been used by FORD to make
sure that the company makes effect sales (Gregorio & Soares, 2013). Sales
budget has been hugely used in production by FORD Company where an estimation
of automobiles production in a given time is done using sales budget. The
returns on the sales are also done using the sales budget. Therefore, sales and
master budget collectively ensure that the company has a financial advantage
over its production processes.
Improvement
Recommendations
FORD Company has some areas of weaknesses
that need to be improved. The major area is the decision making process. The
company needs to change the perspective it possesses on managers. Managers are
viewed as the great elements of mistakes in the company (Patrina, 2014). This
makes managers feel disregarded despite their great efforts to drive the
company towards success. Managers should be given support through constant
training which will improve their input in decision-making.
The company should also do away with trial
and error production method. The trial and error method in an ineffective one, especially
for the financial continuity of the firm. Despite the urge by FORD to invest in
innovation, they should apply sure methods in their production processes that
will offer returns to the company (Baker, 2015).
Conclusion
In general, FORD Company’s financial
process has been effective towards its development. The elements applied in
planning, control, and decision-making have ensured that it remains abreast in
its production processes. In addition, the company’s costing budget and
production costing methods has created an organized production process in it,
thus accruing financial benefits to the company. Therefore, the company should
consistently apply the techniques and ensure that improvements in decision-making
and production are done for its global development.
References
Baker, C. (2015). Organizational change at FORD
Motor Company in the face of international financial crisis. Recherches
En Sciences De Gestion, 110(5), 23. http://dx.doi.org/10.3917/resg.110.0023
Gregorio, L., & Soares, C. (2013).
Comparison between the mix-based costing and the activity-based costing methods
in the costing of construction projects. Journal of Cost Analysis and
Parametrics, 6(2), 77-95. http://dx.doi.org/10.1080/1941658x.2013.843418
Patrina, E. (2014). Managing the organizational
development through global expansion: case study of FORD Motor Company. New
University: Economics & Law, 5(6), 52-56.
http://dx.doi.org/10.15350/2221-7347.2014.5-6.00056
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