Public-Private Partnership in Stadium Financing
In the previous articles, we have already seen that funding a stadium can be very difficult from a financial point of view. The financial aspects of stadium financing can be challenging regardless of whether the financing will be provided by the government or by private parties. It is important to note that stadium financing can […]
Strategic Finance and Technology
Businesses rely heavily on technology in order to obtain a competitive advantage. In today’s world, most successful companies have a technological advantage over their competitors. However, just like business strategy, the technological strategy also involves long-term decision-making. Technological advantages are not developed overnight. Instead, they are the result of decision-making over extended periods of time. […]
Variable Rate Demand Obligations
Municipalities use a wide range of financial instruments in order to borrow funds from the money market. This includes the issuance of short-term debt as well as commercial paper. However, over time they have started using one more type of financial instrument. This instrument is called variable rate demand obligation and is the result of […]
Leasing in Infrastructure Finance
In the previous article, we have studied about how vendor financing is being used as an alternate mechanism of finance in the infrastructure financing community. Similarly, leasing is also being used as a method of raising finances for infrastructure projects. Leasing is primarily used because this method allows conserving capital as well as provides many […]
Separation of Investing and Financing Decisions
We have already seen that there are a lot of differences that arise between what we have learned in accounting and how we use it in corporate finance. The separation of financing and investing decisions is one such important concept. It is important because we have to make a very important adjustment based on this […]
Law firms all across the world practice job costing. Most law firms charge an hourly rate to their clients. This rate is derived on the basis of the same factors direct material, direct labour as well as overheads. In case of law firms, the direct material used is negligible. The majority of the hourly rate signifies the expenses that have to be paid as salaries to the employee lawyers. The overheads required for maintaining the office and shared facilities is split amongst clients based on an estimated overhead.
Movie studios like Walt Disney also follow job costing. Every movie that they produce is a specific job. They allocate costs based on the material and labour that has spent while creating the movie. The tough part is to apportion the cost of equipment, studios and other such shared facilities amongst the various jobs that are being performed i.e. the movies that are being produced.
The cost of Medicare has been a major concern all over the world, of late. This has prompted many hospitals to have a closer look at their costs. Most medical service providers are using job costing to do so. A rational allocation of costs is the only way that costs can be brought down for certain ailments. Proper apportioning of costs ensures that people who common in for medication for common flu do not have to pay for the overheads incurred as a result of having equipment for major diseases like cardiac arrests, strokes, kidney failure etc.
The big 4 accounting firms have always used job costing to bill their clients. Their model is very similar to that of the law firms. With accountants too, the cost of material is negligible. Labour costs can be ascertained fairly easily. The real difficulty is to apportion the overheads amongst varios clients.
Companies that build custom software for clients also use job order costing systems. Most accept a fixed rate project, while some clients insist on time and material. However, the majority of expenditure in a software firm is overheads. These need to be apportioned fairly amongst the different clients.
Service firms have led to the development of job costing procedures. Earlier materials were the major component of costs and could be easily tracked. However, keeping a track of the amount of labour spent on different jobs and their productivity has been the result of the efforts of service firms. Some of their methods and procedures have been adopted by the manufacturing sector too. This has led to increased productivity.
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