Cost Modeling Decision Support Evaluation Case
Before adopting a new technology or a new system in Biomed Source Inc., it is necessary to seek a decision support strategy that will enlighten both the CEO and CFO of the company on the effects of implementing the new system. As such, it is important to notify the management on relevant alternatives to consider during the decision making such as risk, the quality aspects, and cost of the service or technology adapted (Babkin Sergeev 17). Adopting the Resource Consumption Accounting (RCA) will need Biomed Source, Inc. to adhere to a proposed decision support strategy regarding tradeoff analysis, which must consider aspects such as quality, cost, and risk. Based on the cost, the company should consider some finances used in the implementation of the decided alternatives. Based on the current financial situation of the corporation, it can be able to adopt RCA. The approximate value of $500 million earned in the annual revenues amongst other sources of income can suit the purpose of the decision made. The risk associated with the implementation process addresses the risk related to the decision alternatives.
Based on the management accounting system, various risks may be involved in the implementation of RCA in Biomed Source, Inc. (BS). BS utilizes a traditional approach, which employs a reasonable costing method for the cost allocation rate of the organization employees based on machine hours. RCA is a different management approach that describes a dynamic and integrated management concept (Babkin Sergeev 13). It provides the managers with a comprehensive and unique management accounting strategy that gives the managers of the organization a decision support system. Few businesses have successfully incorporated this new management approach in their administration system. It allows the managerial team to use activity-based drivers in the management system. Since BS uses a traditional approach, it might be risky to introduce a new decision support system, which may not suit the operational requirements of BS. The current cost assignment model utilized by BS is not very sophisticated since the company suspects to have product cross-subsidization. By introducing RCA, there is a risk of decline in the operations of the company since RCA might turn out to be complicated for the managerial team to cope up with.
BS does not have the potential of providing adequate information for improving on the decision support method. To come up with the data to address the approximate cost of decision support method, the company has to use the accounting tools, which are mentioned to be in bad working condition. Therefore, there is a risk of failure of successfully incorporating RCA in the system of the company due to lack of adequate information. As per this context, quality defines the overall effect of quality in the system when implementing the alternatives. The decision-making model that should be incorporated should involve an approach that visualizes the overall performance of the company in concern with risk, quality and cost aspects (Babkin Sergeev 19). The management accounting system of BS might be relevant in the operations of the company which includes the medical equipment inspections, preventative maintenance and utilizing the allocated revenue. The management system might be of the essence in the fulfilling of the customer needs, which vary as per the expertise and product requirements for the products servicing.
Work Cited
Babkin, Eduard, and Alexey Sergeev. “Towards developing a model-based decision support method for enterprise restructuring.” Enterprise Engineering Working Conference. Berlin Heidelberg: Springer, 2013.
